Intercontinental Exchange (NYSE: ICE) and Interactive Brokers Group (NASDAQ:IBKR) are both large-cap financials companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, earnings, institutional ownership, profitability, dividends, risk and analyst recommendations.

Institutional & Insider Ownership

90.8% of Intercontinental Exchange shares are held by institutional investors. Comparatively, 15.8% of Interactive Brokers Group shares are held by institutional investors. 1.5% of Intercontinental Exchange shares are held by insiders. Comparatively, 3.4% of Interactive Brokers Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Intercontinental Exchange and Interactive Brokers Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Intercontinental Exchange 27.91% 11.01% 2.18%
Interactive Brokers Group 5.29% 1.35% 0.14%

Dividends

Intercontinental Exchange pays an annual dividend of $0.80 per share and has a dividend yield of 1.1%. Interactive Brokers Group pays an annual dividend of $0.40 per share and has a dividend yield of 0.7%. Intercontinental Exchange pays out 29.1% of its earnings in the form of a dividend. Interactive Brokers Group pays out 34.5% 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. Interactive Brokers Group has raised its dividend for 3 consecutive years. Intercontinental Exchange is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Intercontinental Exchange and Interactive Brokers Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Intercontinental Exchange $5.96 billion 6.91 $1.42 billion $2.75 25.60
Interactive Brokers Group $1.48 billion 16.80 $84.00 million $1.16 51.90

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

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Intercontinental Exchange and Interactive Brokers Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Intercontinental Exchange 0 2 6 0 2.75
Interactive Brokers Group 1 4 0 0 1.80

Intercontinental Exchange presently has a consensus price target of $72.38, indicating a potential upside of 2.82%. Interactive Brokers Group has a consensus price target of $40.60, indicating a potential downside of 32.56%. Given Intercontinental Exchange’s stronger consensus rating and higher probable upside, analysts plainly believe Intercontinental Exchange is more favorable than Interactive Brokers Group.

Volatility and Risk

Intercontinental Exchange has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500. Comparatively, Interactive Brokers Group has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500.

Summary

Intercontinental Exchange beats Interactive Brokers Group on 12 of the 17 factors compared between the two stocks.

Intercontinental Exchange Company Profile

Intercontinental Exchange Inc, formerly IntercontinentalExchange Group, Inc., is a network of regulated exchanges and clearing houses for financial and commodity markets. The Company delivers transparent and accessible data, technology and risk management services to markets around the world through its portfolio of exchanges, including the New York Stock Exchange, ICE Futures, Liffe and Euronext. In February 2014, the Company completed the acquisition of Singapore Mercantile Exchange. In July 2014, Intercontinental Exchange Inc sold its Wombat Financial Software, a unit of NYSE Technologies. Effective September 10, 2014, Intercontinental Exchange Inc acquired an undisclosed majority interest in Holland Clearing House NV.

Interactive Brokers Group Company Profile

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.

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