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Jefferies Is a Long-Term Bargain

The analyst said KBW continues "to believe that JEF represents a high-quality franchise and it has been unjustifiably punished in recent days."

Smith did lower her 12-month price target for Jefferies' shares to $17 from $22, as "the continued overhang of increased regulatory oversight and the speculation for the potential negative impact on EPS could limit a recovery in the stock price." The analyst's $17 target represents a price-to-tangible-book ratio of 1.22, which is "a 34% discount to the firm's 3-yr. [average]".

Smith also said that Jefferies' capital ratios are "now comparable" to Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report), as those companies "have driven ratios lower functioning as [bank holding companies] for some time now."

Jefferies Group's handling of last week's events, the company's strong capital position and growing importance as a dealer in the U.S. and Europe, and Handler's deft maneuvering over the last week, argue that the company is a survivor. The company's low trading multiples make the shares attractive for investors who can commit for several years.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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GS $163.46 -0.51%
MS $27.03 -0.73%
JEF $0.00 0.00%
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