Is Jefferies Still Attractive After Its Recent Rally and Advisory Pivot?

• If you are wondering whether Jefferies Financial Group is still a smart buy after its big multi year run, or if the value case has already played out, you are not alone. This breakdown is here to unpack exactly that question.
• The stock has climbed 2.8% over the last week and 15.8% over the past month, but that sits against a softer backdrop of a -19.9% return year to date and -16.1% over the last year, even after an impressive 106.9% 3 year and 217.6% 5 year performance.
• Recent headlines have focused on Jefferies ongoing pivot deeper into advisory and capital markets, including deals activity and balance sheet repositioning that investors see as key drivers of long term profitability. At the same time, the broader US financials space has been under pressure as markets reassess interest rate expectations and risk appetite, which helps explain some of the recent volatility in the share price.
• On our simple valuation framework, Jefferies currently scores 2 out of 6. This suggests pockets of undervaluation but not across the board. In the sections that follow we will walk through the key valuation lenses investors usually rely on, then finish with a more nuanced way to think about what this stock is really worth.

Jefferies Financial Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Jefferies Financial Group Excess Returns Analysis

The Excess Returns model asks whether Jefferies is earning enough on shareholders equity to justify its current market value, after accounting for the return investors demand for taking on risk.

For Jefferies, the starting point is a Book Value of $50.60 per share and an Average Return on Equity of 9.08, which feeds into a Stable EPS estimate of $5.12 per share, based on forecasts from four analysts. Against this, the model assumes a Cost of Equity of $5.49 per share, implying an Excess Return of $-0.37 per share, meaning projected profits do not fully clear the hurdle rate investors require.

Looking ahead, the Stable Book Value is expected to rise to about $56.37 per share based on three analysts estimates. However, with negative excess returns, the model concludes that future growth does not add much incremental value for shareholders.

Putting these inputs together, the Excess Returns valuation points to an intrinsic value of roughly $50.63 per share, which suggests the stock is about 25.0% overvalued versus the current market price.

Result: OVERVALUED

Our Excess Returns analysis suggests Jefferies Financial Group may be overvalued by 25.0%. Discover 901 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Jefferies Financial Group.

Approach 2: Jefferies Financial Group Price vs Earnings

For a consistently profitable business like Jefferies, the price to earnings ratio is a practical way to gauge what investors are willing to pay for each dollar of current profits. It ties the valuation directly to the bottom line that ultimately supports dividends and buybacks.

In general, faster growing and lower risk companies deserve a higher PE multiple, while slower growth or more cyclical, volatile names usually trade on lower multiples. Jefferies currently trades on about 20.36x earnings, which is slightly below the 21.31x average of its closest peers and well under the broader Capital Markets industry average of roughly 25.71x. On the surface, that discount might look like a clear value opportunity, but it does not fully account for Jefferies specific growth profile and risks.

This is where Simply Wall St’s Fair Ratio comes in. It estimates what a “normal” PE should be for Jefferies, given its earnings growth outlook, profit margins, size, risk factors and industry. On that basis, the Fair Ratio is 18.35x, a more tailored benchmark than simple peer or industry comparisons. With the actual PE sitting above this level, the multiple based view points to Jefferies being modestly overvalued on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1458 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Jefferies Financial Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you explain the story behind your numbers by linking your view of a company’s strategy, industry and execution to a concrete financial forecast and, ultimately, a fair value estimate. On Simply Wall St’s Community page, used by millions of investors, Narratives make this process accessible by guiding you through assumptions for future revenue, earnings and margins, then comparing the fair value that falls out of those assumptions with today’s share price so you can decide how Jefferies Financial Group fits into your portfolio. Because Narratives are updated dynamically as fresh information such as earnings releases, regulatory filings or major news hits the market, they stay aligned with reality rather than a static snapshot. For Jefferies, for example, one investor might build a Narrative that anticipates advisory revenues and margins to expand, while another might assume slower deal activity and more modest profitability, leading to different but clearly explained fair values.

Do you think there's more to the story for Jefferies Financial Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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