Oppenheimer analyst Chris Kotowski reiterated an Outperform rating on Jefferies Financial Group Inc. (NYSE:JEF), raising the price target by $4 to $43.
The analyst sees Jefferies as an under-followed and undervalued mid-cap financial services growth company.
The analyst is remarkably upbeat about how the company has consistently gained a share in its investment banking and trading businesses over the last 20 years without commensurately growing its balance sheet and risk.
As the company continues to simplify its business mix by divesting businesses acquired in the 2013 merger with Leucadia, the analyst believes it will realize gains that will fund share buybacks and earn a higher multiple on the pure financial services businesses that remain.
The analyst applauds the company's continued conservative balance sheet management with limited leverage and risk compared to larger peers.
In addition, Jefferies continues to grow its investment banking and equities business, with continued gradual expansion of market share and operating margins, Kotowski adds.
The company's recent developments have been enhancing Jefferies' capabilities to bank the upper middle market, the predominantly sponsor-backed universe of companies, the analyst notes. He adds that such actions "move the needle" at Jefferies.
A rebound in M&A and underwriting activity can act as critical catalysts for the company.
For FY23, the analyst raised EPS estimate to $1.37 from $1.18.
For FY24, the analyst increased the EPS estimate to $3.78 from $3.74.
Price Action: JEF shares are trading higher by 0.51% to $36.60 on Wednesday.