Optimism is the order of the day after an exceptional 2024 vintage. Revenues up 50% and earnings per share up 169% year-on-year. Jefferies enters the new year with an unprecedented pipeline of transactions in its M&A, IPO and credit segments, as well as a sustained volume of activity in its capital markets segment.

The world's sixth-largest investment bank has gained market share in a difficult environment. The sector is saturated, and advisory fees are under pressure: on a global level, the pie to be shared between Jefferies and its competitors has hardly changed over the last ten years, despite the sharp rise in market capitalizations; while remuneration and regulatory costs have continued to rise.

In 2024, the investment banking segment generated revenues of $3.44 billion, compared with $2.27 billion the previous year, thanks to a high volume of M&A transactions. The capital markets segment generated revenues of $2.75 billion, compared with $2.23 billion the previous year, thanks in particular to the remarkable dynamism of the equity markets.

The investment and asset management segment saw its revenues quadruple from $188 million to $803 million. However, this was largely due to the consolidation of Stratos, the currency broker formerly known as FXCM, and the Italian group Tesselis, whose Jefferies stake is a legacy of the bank's merger with Leucadia.

Like Goldman Sachs, Jefferies' share price has performed exceptionally well over the past five years. In 2019, we emphasized the attractiveness of investing in the sector. 

This rise has broken a decade of painful stagnation from 2009 to 2019, during which Jefferies shares seemed incurably underpriced. This discount persisted despite the continued growth in the bank's business volume, led by the charismatic Richard Handler.

At his instigation, Jefferies implemented an aggressive share buyback policy. Since 2017, the bank has repurchased 159 million of its own shares at an average price of $24. In retrospect, these operations were remarkably well-timed, to say the least.

As optimistic as MarketScreener was at the time, our analysts believe that at now x1.7 to shareholders' equity, Jefferies' valuation - like that of Goldman Sachs for that matter - is moving into risky territory these days, a fortiori after exceptional 2024 results across the board.