The shares of Jefferies Financial Group Inc. have decreased by more than -21.59% this year alone. The shares recently went down by -6.57% or -$1.46 and now trades at $20.77. The shares of H&R Block, Inc. (NYSE:HRB), has slumped by -0.95% year to date as of 10/11/2018. The shares currently trade at $25.97 and have been able to report a change of 3.63% over the past one week.
The stock of Jefferies Financial Group Inc. and H&R Block, Inc. were two of the most active stocks on Thursday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.Next 5Y EPS Growth: 18.00% versus 10.00%
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that JEF will grow it’s earning at a 18.00% annual rate in the next 5 years. This is in contrast to HRB which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of JEF implies a greater potential for capital appreciation over the years.Profitability and Returns
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. JEF has an EBITDA margin of 37.72%, this implies that the underlying business of JEF is more profitable. The ROI of JEF is 2.80% while that of HRB is 37.60%. These figures suggest that HRB ventures generate a higher ROI than that of JEF.Cash Flow
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, JEF’s free cash flow per share is a positive 20.81, while that of HRB is negative -13.78.Liquidity and Financial Risk
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for JEF is 0.60 and that of HRB is 2.30. This implies that it is easier for JEF to cover its immediate obligations over the next 12 months than HRB. The debt ratio of JEF is 2.01 compared to 7.79 for HRB. HRB can be able to settle its long-term debts and thus is a lower financial risk than JEF.Valuation
JEF currently trades at a forward P/E of 11.70, a P/B of 0.69, and a P/S of 0.80 while HRB trades at a forward P/E of 12.61, a P/B of 28.23, and a P/S of 1.70. This means that looking at the earnings, book values and sales basis, JEF is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of JEF is currently at a -35.09% to its one-year price target of 32.00. Looking at its rival pricing, HRB is at a 2.12% relative to its price target of 25.43.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), JEF is given a 1.50 while 2.80 placed for HRB. This means that analysts are more bullish on the outlook for HRB stocks.Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for JEF is 2.46 while that of HRB is just 10.34. This means that analysts are more bullish on the forecast for JEF stock.
The stock of H&R Block, Inc. defeats that of Jefferies Financial Group Inc. when the two are compared, with HRB taking 3 out of the total factors that were been considered. HRB happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, HRB is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for HRB is better on when it is viewed on short interest.