What Happened
Investment bank Jefferies Financial Group (JEF +3.29%) has been on a roll, as its stock price increased 39% through the first half of 2021, according to data provided by S&P Global Market Intelligence. This market mover beat the S&P 500, which gained 15% year to date through the first two quarters.
Currently, as of July 15, it was up about 35% year to date, topping the financial sector, which is up about 23% over the same period. And there's reason to believe it has more room to run.
Image source: Getty Images.
So what
Jefferies is an investment bank and asset manager, but it makes most of its money as an investment bank, catering mainly to the middle market. It was a good place to be in 2020 as Jefferies Group, the investment banking arm, had a record 67% jump in net income year over year.
Jefferies had another record quarter in the first quarter with revenue up 82% to $2.1 billion and earnings up 188% to $494 million year over year. This efficient firm had an operating margin of 31.5% and a return on tangible common equity of 33%, due to investments in technology and infrastructure. The success has been the culmination of years of consistent growth, which has enabled Jefferies to gain market share. Currently, it is ranked in the top 10 among investment banks by revenue, up from about 18 four years ago.
Now what
There is a lot to like about Jefferies Financial, from its efficient management to its consistent earnings growth to its great value. The stock is trading at about six times earnings, with a forward price-to-earnings (P/E) ratio of 10. That is ridiculously low for such a solid company with a robust pipeline of deals in an industry poised for continued growth. It currently has a price-to-book (P/B) ratio of 0.83, which means it is trading below its book value. This is a great stock at a great value right now.
