Earnings

A Comparison of Top Movers: Jefferies Financial Group Inc. (JEF), Jagged Peak Energy Inc. (JAG)

The shares of Jefferies Financial Group Inc. have decreased by more than -17.18% this year alone. The shares recently went down by -0.45% or -$0.1 and now trades at $21.94. The shares of Jagged Peak Energy Inc. (NYSE:JAG), has slumped by -21.86% year to date as of 11/08/2018. The shares currently trade at $12.33 and have been able to report a change of -3.22% over the past one week.

The stock of Jefferies Financial Group Inc. and Jagged Peak Energy 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.

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 JAG is -52.00%. These figures suggest that JEF ventures generate a higher ROI than that of JAG.

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 negative -9.44, while that of JAG is also a negative -0.03.

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 0.70 and that of JAG is 1.10. This implies that it is easier for JEF to cover its immediate obligations over the next 12 months than JAG. The debt ratio of JEF is 2.08 compared to 0.62 for JAG. JEF can be able to settle its long-term debts and thus is a lower financial risk than JAG.

Valuation

JEF currently trades at a forward P/E of 12.83, a P/B of 0.71, and a P/S of 0.85 while JAG trades at a forward P/E of 14.45, a P/B of 3.36, and a P/S of 5.72. 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 -33.52% to its one-year price target of 33.00. Looking at its rival pricing, JAG is at a -28.56% relative to its price target of 17.26.




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 1.00 while 2.20 placed for JAG. This means that analysts are more bullish on the outlook for JAG 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 2.68 while that of JAG is just 10.04. This means that analysts are more bullish on the forecast for JEF stock.

Conclusion

The stock of Jagged Peak Energy Inc. defeats that of Jefferies Financial Group Inc. when the two are compared, with JAG taking 5 out of the total factors that were been considered. JAG 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, JAG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for JAG is better on when it is viewed on short interest.

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