Key Points
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Interactive Brokers' client accounts climbed 35% year over year as of August, over twice the pace a five-year double would require.
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Net interest income is the firm's biggest revenue line, and its growth picked up even as the Federal Reserve cut rates.
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The stock trades at roughly 29 times next year's expected earnings, more than double the price-to-earnings multiple of rival Charles Schwab.
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Shares of Interactive Brokers (NASDAQ:IBKR) trade near $89 as of this writing, roughly 10% under their 52-week high of $98.75. And they're not cheap. The stock costs roughly 29 times next year's expected earnings, a growth stock price on a brokerage.
Where the stock stands in five years depends on two things: how much the firm earns by then, and what investors will pay for every dollar of those earnings. The second is beyond everyone's control.
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The useful question is what the business would have to do to send the stock materially higher -- say, a double by late 2031. That's roughly 15% a year, compounded.
What would a double require?
If the stock's price-to-earnings multiple in 2031 is the same one it has now, shares double when earnings per share double.
The tech firm is clearing this bar with lots of room. In the first half of 2026, net interest income grew 20% year over year, commission revenue grew around 25%, and earnings per share climbed 30%.
But don't expect profit margins to provide any of the growth. Interactive Brokers already turns roughly 77% of its net revenues into pre-tax profit, a level with little room left to climb.
So in the next five years, earnings should rise roughly as fast as revenue. And revenue follows the money clients hold with the broker and how much they trade.
The balances have outrun the rates
Net interest income is what the company earns from clients' idle cash and from the margin loans it makes against their portfolios. It was $2.8 billion in 2023, $3.1 billion in 2024, and $3.6 billion in 2025 -- 57% of last year's net revenues and its biggest revenue line. What strikes me is that the growth hasn't needed any help from rates. The Federal Reserve cut rates three times in the second half of 2025, but growth picked up, from 13% last year to 20% in the first half of 2026. The balances rose faster than the rates fell.
For the interest line to double by 2031 with rates unchanged, the balances behind it would need to roughly double. Customers' credit balances were $185.6 billion at the end of August, with margin loans at $101.5 billion -- up 27% and 41%, respectively, year over year. Doubling would put them near $370 billion and $200 billion.
Rates can still move the line, of course. The Federal Reserve hiked its benchmark rate a quarter point on Sept. 16. Interactive Brokers estimates a move that size in U.S. dollar rates would change its annual net interest income by around $81 million either way (around 2% of the line's current pace). And the 10-year Treasury yield's recent rise past 5% matters less here than it might seem, as substantially all the company's investment portfolio matures within three months.
Margin loans are the least reliable part. They hit $108.5 billion at the end of the second quarter before falling to $101.5 billion by the end of August, and a tough market could shrink them far quicker than that.
Accounts would need to double
Balances track customers, after all, and customers keep coming. Interactive Brokers finished August with 5.46 million client accounts, 35% more than a year before, holding $962.8 billion in equity -- an average of around $176,000 per account.
If the money per account stays flat, doubling the balances means doubling the accounts, to roughly 11 million. That takes 15% yearly growth, and the base is compounding at 35% now.
Put another way, account growth could drop by more than half, and the customer count would still double by 2031. An ugly bear market could stall the pace for a year or two, of course. But the requirement leaves room for just that.
Will the premium hold?
That leaves the stock's price-to-earnings multiple, the part the company can't control. Charles Schwab costs roughly 13 times next year's expected earnings, so Interactive Brokers trades at more than double its rival's valuation.
But if earnings double over five years while the price-to-earnings multiple shrinks from 29 to 20, the stock returns roughly 38% in total (about 7% a year). If it holds, the same earnings double the stock.
Where does all that leave the stock in five years? Higher, I think, and perhaps far higher. The bigger unknown is the price-to-earnings multiple investors will pay in 2031, and I won't claim to know it. My expectations rest on the business instead. It's the half that keeps showing up in the monthly numbers.
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Charles Schwab is an advertising partner of Motley Fool Money. Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends Charles Schwab and recommends the following options: long January 2027 $43.75 calls on Interactive Brokers Group, short January 2027 $46.25 calls on Interactive Brokers Group, and short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.