$30.94
$61.27
bear $30.94
base $51.94
bull $61.27
margin of safety $27.00
market price* $44.80
Jefferies Financial Group is a global investment bank and broker-dealer. Of its $7.34 billion of fiscal 2025 net revenue (year to November 30, 2025), about 68% was booked in the Americas, 24% in Europe and the Middle East and 8% in Asia-Pacific. It earns advisory and underwriting fees (mergers, equity and debt capital markets), trading revenue in equities and fixed income, asset-management income, and its share of two 50%-owned ventures: Jefferies Finance (leveraged lending) and Berkadia (commercial mortgage banking and servicing). Since 2018 the old Leucadia holding company has been turned into a focused investment bank by selling or spinning off National Beef, Vitesse Energy, HomeFed's land, Idaho Timber and other legacy holdings. Japan's SMBC Group is a strategic partner; in September 2025 Jefferies agreed to let SMBC raise its economic ownership to 20%. How we measure earnings. A broker-dealer's reported operating cash flow swings by billions of dollars with its trading inventory, repo book and customer balances (minus $1.5 billion in fiscal 2025, plus $1.8 billion in 2022), so we remove all of those balance-sheet movements and measure owner earnings as net income to common shareholders, plus depreciation and deferred taxes, with joint-venture profits replaced by the cash those ventures actually paid out, one-off gains on selling businesses removed, and the capital spending needed to keep the business running subtracted. Two judgements matter. First, Jefferies pays a large part of its people in restricted cash awards ($533 million of expense in fiscal 2025, up from $325 million in 2023). The cash-flow statement adds most of this back as a non-cash item, but it is a real, recurring pay cost and we keep it as one; counting it the company's way would lift fiscal 2025 owner earnings from about $773 million to about $1.34 billion. Second, fiscal 2023 capital spending was reported net of disposal proceeds at only $1 million, so we used the average of the neighbouring years instead. On this basis owner earnings per share were $3.48 in 2020, $6.54 in 2021, $1.86 in 2022, $1.68 in 2023, $2.73 in 2024 and $3.47 in 2025. Normal earning power. Investment banking is cyclical, so we take the median of fiscal 2020 to 2025, a window that holds a boom (2021), a bust (2022-23) and a recovery: about $3.10 per share. Fiscal 2019 is left out because it still carried Leucadia's legacy holdings and a one-time $545 million non-cash tax benefit. The first half of fiscal 2026 (December 2025 to May 2026) produced pre-tax income of $528 million against $286 million a year earlier, so the current year is running above normal; we let that lift only the first year or two, not the normal level. Growth. We credit none. Jefferies has grown by hiring bankers and through the SMBC alliance, but that growth depends on deal markets and on winning share, and its record is too uneven to treat as a proven, repeatable process. Owner earnings per share rose 27% in fiscal 2025; the base case starts below that, at $3.30 for the coming year against $3.47 last year. Base case, $51.94 per share: about $3.30 next year, $3.20 the year after, then $3.10 a year, held flat beyond year ten. We carry the earnings on past year ten because the franchise has shown it keeps earning through cycles: it has operated since 1962, came through the 2008 crisis and the 2020 shutdown, and now has a 20% strategic shareholder. Bear case, $30.94 per share: one full markets downturn of the 2008 kind, when broker-dealers including Jefferies lost money for the year. Earnings slip to $2.40 next year, then a loss of $2.40 per share (about $530 million from trading write-downs, leveraged-loan losses at Jefferies Finance and counterparty receivable losses of the First Brands kind), a weak recovery of $0.50 and $1.70, and a lower normal of $2.20 a year after that, close to the 2022-24 average. Shareholders' equity of $10.6 billion can absorb a loss of that size without issuing new shares. This value is below tangible book value of roughly $40 per diluted share, so it does not depend on the franchise being worth more than its capital in a crisis. Bull case, $61.27 per share: the current strong deal cycle lasts. Earnings run at $4.20 a share for two years and $3.80 in the third, then settle at $3.60, a level the business has already earned (fiscal 2020 and 2025), with the SMBC alliance, now extended to Europe and the Middle East, helping hold Jefferies' share of deals. Debt. For a broker-dealer, borrowing is raw material. Repo funding, customer balances and $18.0 billion of long-term debt (May 2026, up from $9.7 billion in November 2023) fund a $79.5 billion balance sheet, about 7.5 times shareholders' equity. Interest is an operating cost already deducted from owner earnings, so no debt is subtracted from any case; each case value is what the business is worth to shareholders after its lenders. Leverage is charged in the bear case through the loss year. What could go wrong. Jefferies funds itself in wholesale markets rather than with deposits, so a loss of lender confidence is the risk none of the cases models; in late 2011, after MF Global failed, Jefferies had to cut its European government bond positions to calm funding fears. Losses can also arise outside the trading book: in its fiscal 2025 10-K, Jefferies disclosed that First Brands, an auto-parts maker, filed for Chapter 11 bankruptcy beginning September 24, 2025, that the bankruptcy proceedings have uncovered what are alleged to be fraudulent activities at First Brands, and that Point Bonita, a trade-finance fund run by Jefferies' asset-management arm, had about $715 million of purported receivables tied to First Brands. Jefferies' own stake in that fund was $113 million, and CLOs run by Jefferies Finance's Apex unit held about $58 million of First Brands loans, but the company says recovery will take months to years and is uncertain, and litigation and reputational costs remain open. Our previous estimate (August 2026) was built on a different basis and its figures are not comparable. Margin-of-safety price, $27. How sure are we of the earnings level? Not very: six recent years ranged from $1.68 to $6.54 a share, though the $3.10 median sits close to what the business earned in ordinary years such as 2020 and 2025. The worst plausible event is a funding run in a market panic; with no deposit base and 7.5 times leverage, the shares could be badly diluted, although a 20% strategic shareholder and $10.6 billion of equity make outright failure unlikely. If we are wrong about normal earnings (nearer $2.20 than $3.10) and a 2008-style loss year arrives, the shares are worth about $31. The price assumes a three-to-five-year holding period for a full deal cycle to show the earning power, and the $1.60 annual dividend is about 6% of $27. At $27 the price is about two-thirds of tangible book value and under nine times normal owner earnings; even the 2023 trough year earned more than 6% on that price. If normal earnings hold, the base case implies roughly 20% a year or better over three to five years including dividends, and the bear case implies about the starting price back plus dividends. A higher price would leave too little room for the wide spread of outcomes in this business.