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Jefferies Financial Group Inc. (NYSE:JEF), which is in the diversified financial business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. As a US$6.3b market-cap stock, it seems odd Jefferies Financial Group is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Jefferies Financial Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Jefferies Financial Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Jefferies Financial Group’s ratio of 26.8x is trading slightly above its industry peers’ ratio of 23.08x, which means if you buy Jefferies Financial Group today, you’d be paying a relatively reasonable price for it. And if you believe Jefferies Financial Group should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Jefferies Financial Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Jefferies Financial Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Jefferies Financial Group’s earnings over the next few years are expected to increase by 68%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in JEF’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at JEF? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on JEF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for JEF, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Jefferies Financial Group. You can find everything you need to know about Jefferies Financial Group in the latest infographic research report. If you are no longer interested in Jefferies Financial Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.