Jefferies Financial group has reported Earnings for the second quarter were disappointing, falling short of expectations by an astounding 84.6%. Earnings were impacted by a failed investment, not the core business. The company’s stock, despite the decline, is currently trading at a discounted price to its book value. This presents an opportunity for investors.
Key Points
1. Jefferies has missed its earnings targets by a considerable margin. It was the company’s least profitable quarter since the financial crisis of 2008.
2. The main reason for the earnings decline is an unrelated, failed investment rather than problems with the core operations of the company.
3. Jefferies stock may offer investors an opportunity, despite its recent stock decline. It is currently trading below its book value as well as historical valuation ranges.
Jefferies Financial Group has announced disappointing second-quarter results. This is not surprising to investors as the company stock has been declining for the past two year.
Investors can rejoice that the earnings decline was not due to the core business of the company, but a failed investment into a non-related industry. This decline does not reflect the overall performance.
Jefferies Financial Group has not given up hope. Certain indicators and multiples of valuation suggest that the stock may experience a turn around and rise in price.
Jefferies has performed poorly in comparison with its competitors. Interactive Brokers Group has surpassed Jefferies in the last year by 22%. The valuation multiples for the two companies reflect the difference in performance. The higher valuations for Interactive Brokers Group are indicative of a positive investor perception.
Jefferies management cited a cyclical downturn in the industry as the main cause of the earnings decline. This slowdown was caused by the Federal Reserve increasing interest rates. It made financing more costly and reduced the potential for profit.
Jefferies Financial Group has seen its earnings fall due to a nonrecurring event: a failed OpNet investment, a unrelated business segment. This investment led to a loss of significant proportions for the company.
Management is confident about the future because there are positive economic trends developing. The management bought 2.2 million common shares to demonstrate their confidence. This shows that the company’s management thinks its stock is currently being undervalued.
Jefferies’ stock trades at a discount compared to the book value of its shares and historic price-to earnings ratios. Investors have the opportunity to buy Jefferies stock at a discount compared with its historical price ranges.
Investors who are considering Interactive Brokers Group should be aware of the fact that it is not a stock recommended by top-rated analysts. Analysts recommend five other stocks they believe are more suitable.
