We have noted Jefferies Financial's positive performance during today's afternoon trading session, during which it logged a 3.7% outperformance of the S&P 500. At its current price of $39.14, the company is now trading in range of its average target price of $38.5, which calls into question its ability to keep moving higher. Analysts have given the Capital Markets stock target prices ranging from $28 to $52 dollars per share, with an average rating of buy.
The market seems to share this rosy outlook, since Jefferies Financial has a short interest of only 1.9%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Jefferies Financial, institutional investors own 66.1% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in JEF, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
In conclusion, we see positive market sentiment regarding Jefferies Financial because of an analyst consensus of little upside potential, a buy rating, a very low short interest, and an average number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about JEF:
The stock has trailing 12 month earnings per share (EPS) of $3.67
Jefferies Financial has a trailing 12 month Price to Earnings (P/E) ratio of 10.7 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 0.9 in contrast to the S&P 500's average ratio of 2.95
Jefferies Financial is a Financial Services company, and the sector average P/E and P/B ratios are 13.34 and 1.95 respectively