Interactive Brokers Group (NASDAQ: IBKR) and CBOE Holdings (NASDAQ:CBOE) are both mid-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their earnings, analyst recommendations, profitability, risk, valuation, institutional ownership and dividends.

Insider and Institutional Ownership

14.2% of Interactive Brokers Group shares are held by institutional investors. Comparatively, 79.7% of CBOE Holdings shares are held by institutional investors. 3.4% of Interactive Brokers Group shares are held by company insiders. Comparatively, 1.0% of CBOE Holdings shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Interactive Brokers Group has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500. Comparatively, CBOE Holdings has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500.

Profitability

This table compares Interactive Brokers Group and CBOE Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Interactive Brokers Group 4.97% 1.19% 0.13%
CBOE Holdings 17.81% 17.45% 9.24%

Earnings & Valuation

This table compares Interactive Brokers Group and CBOE Holdings’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Interactive Brokers Group $1.36 billion 2.15 $73.61 million $1.03 39.79
CBOE Holdings $1.31 billion 8.29 $473.86 million $1.81 53.20

CBOE Holdings has higher revenue, but lower earnings than Interactive Brokers Group. Interactive Brokers Group is trading at a lower price-to-earnings ratio than CBOE Holdings, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Interactive Brokers Group and CBOE Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Interactive Brokers Group 1 4 0 0 1.80
CBOE Holdings 1 5 8 0 2.50

Interactive Brokers Group currently has a consensus price target of $38.60, indicating a potential downside of 5.81%. CBOE Holdings has a consensus price target of $75.61, indicating a potential downside of 21.49%. Given Interactive Brokers Group’s higher probable upside, research analysts clearly believe Interactive Brokers Group is more favorable than CBOE Holdings.

Dividends

Interactive Brokers Group pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. CBOE Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 1.0%. Interactive Brokers Group pays out 38.8% of its earnings in the form of a dividend. CBOE Holdings pays out 55.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

CBOE Holdings beats Interactive Brokers Group on 11 of the 16 factors compared between the two stocks.

About Interactive Brokers Group

Interactive Brokers Group, Inc. (IBG, Inc.) is a holding company. The Company is an automated global electronic broker and market maker specializing in routing orders, and executing and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on over 120 electronic exchanges and market centers around the world and offering custody, prime brokerage, securities and margin lending services to customers. It operates in two segments: electronic brokerage and market making. It conducts its electronic brokerage business through its Interactive Brokers (IB) subsidiaries. It conducts its market making business through its Timber Hill (TH) subsidiaries. In the United States, it conducts its business from Greenwich, Connecticut and Chicago, Illinois. Outside the United States, it conducts business in Canada, England, Switzerland, Liechtenstein, China (Hong Kong and Shanghai), India, Australia and Japan.

About CBOE Holdings

CBOE Holdings, Inc. is a holding company. The Company’s principal business is operating markets that offer for trading options on various market indexes (index options), on an exclusive basis, and futures contracts, as well as on non-exclusive multiply listed options, such as options on the stocks of individual corporations (equity options), and options on other exchange-traded products (ETP options), such as exchange-traded funds (ETF options) and exchange-traded notes (ETN options). The Company’s subsidiaries include Chicago Board Options Exchange, Incorporated (CBOE), CBOE Futures Exchange, LLC (CFE), C2 Options Exchange, Incorporated (C2), Market Data Express, LLC and Chicago Options Exchange Building Corporation. The Company operates CBOE, CFE and C2 as stand-alone exchanges. The options contracts listed for trading include options on indexes, equities and ETPs. In addition, the Company provides a marketplace for trading futures contracts through CFE.

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