Financial stocks were in rally mode early Wednesday, but gains faded, despite a big rise in the 10-year Treasury yield. Jefferies Financial Group (JEF) is one of several top-performing stocks to watch in the financial sector, giving it a spot in the IBD 50 index of leading growth stocks.
Year to date, Jefferies stock is up about 30%, more than triple the S&P 500’s performance. Over the past 12 months, Jefferies is up more than 130%, vs. a 42% gain for the S&P 500.
Jefferies is testing support at its 50-day moving average as it forms a base. The pattern qualifies as a flat base because of a shallow pullback of only 14%. But some higher-volume declines since the start of the base in mid-March hurt Jefferies’ Accumulation/Distribution Rating of D.
The latest base, with a 34.96 buy point, is still early stage, which means Jefferies could still have more room to run. Jefferies cleared a first-stage flat base at the start of the year, but the stock flashed a sell signal when it erased a double-digit gain from a 24.40 buy point. But the stock soon rebounded and made a 52% run to its March peak.
Bank Stocks To Watch
Jefferies is one of the top-rated bank stocks to watch in IBD’s investment banking group, which ranks in the top quartile of IBD’s 197 Industry Group rankings. Jefferies’ Composite Rating of 98 from Stock Checkup ranks it No. 3 in the group, behind other top stocks to watch like Oppenheimer (OPY) and Cowen (COWN).
Big earnings and sales growth, along with leading stock price performance over the past 12 months, contribute to Jefferies’ strong Composite Rating.
On March 24, Jefferies reported a 476% surge in profit for the fiscal first quarter ended in February. Revenue vaulted 79% to nearly $2.5 billion. The results marked the third straight quarter of explosive growth for Jefferies. In fiscal Q3, revenue soared 89%. In fiscal Q4, revenue jumped 68%.
Investment banking revenue was strong in Q1, up 79% to $1.03 billion.
Improving ROE, Pretax Margin
Fiscal 2020 return on equity improved to 8.2%, the highest since fiscal 2012. An annual pretax margin of 17.8% also hit a multiyear high.
The company repurchased 5 million shares in the quarter for $128 million. Over the past three years, Jefferies has bought back $2.6 billion worth of stock. In the Q1 report, the firm announced it had boosted its share buybacks by $193 million to a total of $250 million.
“Jefferies’ record results for the first quarter of 2021 reflect the continued momentum and market share gains we experienced throughout 2020, where the growth in our primary businesses can now be seen to have exceeded those of the broader industry,” said CEO Rich Handler in the earnings news release.
Jefferies pays a quarterly dividend of 20 cents a share, giving it an annualized yield of around 2.5%. The next dividend will be paid on May 28 to shareholders of record May 17. In January, the firm raised its dividend by 33%.
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.
YOU MAY ALSO LIKE: