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) and Morgan Stanley (MS), 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 http://twitter.com/PhilipvanDoorn.
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