With EPS Growth And More, Jefferies Financial Group (NYSE:JEF) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Jefferies Financial Group (NYSE:JEF), which has not only revenues, but also profits. While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Jefferies Financial Group

How Fast Is Jefferies Financial Group Growing Its Earnings Per Share?

In the last three years Jefferies Financial Group’s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn’t tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, Jefferies Financial Group’s EPS soared from US$4.47 to US$5.89, over the last year. That’s a commendable gain of 32%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Jefferies Financial Group’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Jefferies Financial Group’s EBIT margins were flat over the last year, revenue grew by a solid 4.8% to US$7.4b. That’s a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Jefferies Financial Group.

Are Jefferies Financial Group Insiders Aligned With All Shareholders?

Since Jefferies Financial Group has a market capitalization of US$7.9b, we wouldn’t expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$1.6b. Coming in at 20% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Should You Add Jefferies Financial Group To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Jefferies Financial Group’s strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I’m not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Even so, be aware that Jefferies Financial Group is showing 1 warning sign in our investment analysis , you should know about…

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.