JEF
Jefferies Financial Group Inc.
$54.87
Banks, Insurers & Asset Managers
90%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 26.5% below fair value
You pay
$54.87
Bear
$52.27
Fair
$74.67
Bull
$97.07
Bear
$52.27
-4.7%
ROTCE 6.2% → 0.30x TBV
Fair
$74.67
+36.1%
ROTCE 8.3% → 0.49x TBV
Bull
$97.07
+76.9%
ROTCE 9.6% → 0.64x TBV
Key Value Driver
ROTCE (8.3%) vs. cost of equity (12.8%)
Implied Market Multiple
1.31x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $62.40 from 9 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $74.67 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Return on equity (8.3%) is below the minimum investors require (12.8%). This means the bank is worth less than the net assets on its books.
Dividend-based valuation: $28.86 (63% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly