Is Goldman Sachs Stock Attractive At The Current Levels?

+5.97%
Upside
363
Market
385
Trefis
GS: Goldman Sachs logo
GS
Goldman Sachs

Goldman Sachs’ stock (NYSE: GS) has lost roughly 3% YTD as compared to the 17% drop in the S&P500 index over the same period. Further, at its current price of $382 per share, it is trading just below its fair value of $385 – Trefis’ estimate for Goldman Sachs’ valuationThe investment bank posted better-than-expected results in the third quarter of 2022, beating both revenues and earnings estimates. The total revenues decreased 12% y-o-y to $11.98 billion, mainly driven by a 57% drop in investment banking and a 20% decline in the asset management units. While the investment banking business suffered due to lower underwriting and M&A deal volumes, the asset management was down due to lower revenues in the equity investments category. That said, the top line was somewhat supported by an 11% rise in sales & trading and an 18% increase in the consumer & wealth management businesses. The sales & trading benefited from a 41% growth in the FICC (fixed income, currency & commodity) trading revenues. On the expense front, total noninterest expenses as a % of revenues increased in the quarter, along with provisions for credit losses. Overall, the adjusted net income fell by 44% y-o-y to $ 2.96 billion.

The bank’s top line declined by 21% y-o-y to $36.8 billion in the first nine months of 2022. It was because of a 45% drop in investment banking and a 71% decrease in asset management revenues. However, the effect was partially offset by a 14% increase in sales & trading and a 21% growth in the consumer & wealth management divisions. Altogether, the adjusted net income decreased 45% y-o-y to $9.6 billion over the same period. It was due to an unfavorable build-up in provisions figure and higher expenses as a % of revenues.

Moving forward, we expect the same trend to continue in the fourth quarter. All in all, Goldman Sachs revenues are estimated to remain around $48.5 billion in FY2022. Additionally, GS’ adjusted net income margin, which improved from 20% to 35.6% in 2021, is likely to decrease to 25% in the year, leading to an adjusted net income of $11.95 billion. This coupled with an annual EPS of $34.30 and a P/E multiple of just above 11x will lead to a valuation of $385.

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 Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GS Return 11% -3% 60%
 S&P 500 Return 2% -17% 77%
 Trefis Multi-Strategy Portfolio 5% -18% 223%
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  3. Is Goldman Sachs Stock Fairly Priced?
  4. Goldman Sachs Stock Posted Mixed Results In Q4, What To Expect?
  5. Goldman Sachs Stock To Report Mixed Results In Q4?
  6. Goldman Sachs Stock Has A 15% Upside

[1] Month-to-date and year-to-date as of 11/15/2022
[2] Cumulative total returns since the end of 2016

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