Jefferies Financial Group (JEF): Assessing Valuation After Launch of New Fixed-Income Offerings

Jefferies Financial Group (JEF) has rolled out a series of fixed-income offerings, featuring senior unsecured notes with fixed rates and callable terms. This move signals a strategic effort to bolster its capital and manage funding flexibility.

See our latest analysis for Jefferies Financial Group.

Jefferies Financial Group’s recent fixed-income offerings come amid a challenging year for its shares, as the stock has retreated with a 29.8% year-to-date share price return. Despite negative momentum in recent months, its three-year total shareholder return of nearly 87% demonstrates the company’s ability to deliver over the long haul, even as investors weigh the implications of new funding initiatives.

If these moves have you thinking more broadly about portfolio potential, now could be an ideal time to discover fast growing stocks with high insider ownership.

With Jefferies trading nearly 18% below analyst price targets and boasting steady long-term gains, the question is whether investors are overlooking a bargain or if expectations for future growth are already factored in.

Price-to-Earnings of 17.9x: Is it justified?

Jefferies Financial Group trades at a price-to-earnings (P/E) ratio of 17.9x, which is below both the US market average of 18.9x and the Capital Markets industry average of 27x. At the last close of $55.5, this multiple positions Jefferies as relatively undervalued compared to its main competitors.

The price-to-earnings ratio measures how much investors are willing to pay per dollar of earnings, making it crucial in evaluating companies such as Jefferies that generate consistent profits. A lower P/E may signal that the market is underappreciating the company’s earning power or factoring in slower growth prospects.

In Jefferies' case, the current multiple appears warranted given its robust earnings growth, which surpassed both its own five-year track record and that of the broader industry. The P/E is not only below its peer average but also closely aligns with the estimated fair P/E ratio of 18.1x. This suggests valuation could shift if the company's momentum continues or expectations improve.

Explore the SWS fair ratio for Jefferies Financial Group

Result: Price-to-Earnings of 17.9x (UNDERVALUED)

However, Jefferies faces ongoing share price volatility and slower recent revenue growth. These factors could challenge its undervaluation thesis if these trends persist.

Find out about the key risks to this Jefferies Financial Group narrative.

Another View: What Does the SWS DCF Model Say?

While Jefferies appears attractively valued by traditional ratios, our DCF model paints a different picture. The SWS DCF analysis suggests the stock is actually trading above its estimated fair value, which raises questions about how much growth potential remains for new investors. Which perspective provides a clearer view of the real opportunity?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Jefferies Financial Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Jefferies Financial Group Narrative

If you see an opportunity that the numbers miss or want a different perspective, you can craft your own deep-dive in just minutes. Do it your way.

A great starting point for your Jefferies Financial Group research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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