Is Goldman Sachs Stock Attractive At The Current Levels?

GS: Goldman Sachs logo
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]
YTD [1]
Total [2]
 GS Return 11% -3% 60%
 S&P 500 Return 2% -17% 77%
 Trefis Multi-Strategy Portfolio 5% -18% 223%
Relevant Articles
  1. Trailing S&P500 By 18% Since The Start Of 2023, What To Expect From Goldman Sachs Stock?
  2. Down 12% In The Last Twelve Months, Where Is Goldman Sachs Stock Headed?
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  4. Goldman Sachs Stock Is Undervalued At The Current Levels
  5. Goldman Sachs To Edge Past the Consensus In Q1
  6. Goldman Sachs Stock Is Trading Below Its Intrinsic Value

[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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