5 Most Undervalued Growth Stocks To Buy According To Analysts

2. Interactive Brokers Group, Inc. (NASDAQ:IBKR)

Number of Hedge Fund Holders: 44

Average Analyst Price Estimate: $109

According to Yahoo Finance, the 12-month average analyst price target for financial services company Interactive Brokers Group, Inc. (NASDAQ:IBKR) is $109. Interactive Brokers Group, Inc. (NASDAQ:IBKR) was trading at around $75.70 as of May 22. This shows that Interactive Brokers Group, Inc. (NASDAQ:IBKR) has a huge upside potential.

During the first quarter, Interactive Brokers Group, Inc. (NASDAQ:IBKR)’s adjusted EPS came in at $1.35, missing estimates by $0.06. Revenue in the quarter jumped a whopping 64.3% year over year to $1.06 billion.

As of the end of the first quarter of 2023, the biggest hedge fund stakeholder of Interactive Brokers Group, Inc. (NASDAQ:IBKR) was William B. Gray’s Orbis Investment Management which owns a $591 million stake in the company.

Heartland Mid Cap Value Fund made the following comment about Interactive Brokers Group, Inc. (NASDAQ:IBKR) in its Q1 2023 investor letter:

“Financials. Unlike the broader financial sector, which sank in the quarter, Interactive Brokers Group, Inc. (NASDAQ:IBKR), a fully digital brokerage platform, gained 14.24% in the first three months of the year.

Interactive Brokers’ differentiated business model shined because the company’s management team built the business to avoid the two risks that came to the forefront for sector peers this quarter, credit and interest-rate risk. IBKR is a prime example of why analyzing businesses under multiple scenarios, both good and bad, is so important. In late 2021, when we began purchasing IBKR, the market was not pricing credit or interest-rate risk into the sector. Banks appeared optically “cheap” on P/E multiples, but after adjusting for downside risks, the upside versus downside potential was far more compelling in Interactive Brokers than in banks. Today that gap has narrowed, however, we continue to hold a position in IBKR given its lack of credit risk, which has yet to be fully priced into many banks.

IBKR enjoys industry- and sector-leading pre-tax margins thanks to its highly automated platform that drives scale efficiencies, which are partially passed on to customers in the form of attractive interest rates on cash balances. For this reason, clients have little incentive to move deposits as interest rates rise. IBKR’s management team has refused to take duration risk thereby significantly lowering the chances of a “run on the bank” scenario that proved disastrous for several banks this year. Credit risk is limited to margin loans that are over-collateralized and marked to market in real time thereby significantly reducing any loss given default.”