Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Goldman Sachs Group, Inc. (GS) a Good Stock to Buy?

Page 1 of 2

Goldman Sachs Group, Inc. (NYSE:GS) has outperformed the S&P 500 so far this year, thanks at least in part to a quarterly report which beat analyst expectations. In the fourth quarter of 2012, earnings were more than double what they were a year earlier and earnings per share came in about 50% above analyst expectations. Non-interest revenue grew by 28% in the year as a whole (led by growth in market making activities), offsetting a decline in net interest income.

2012 earnings per share were $14.13, placing Goldman Sachs Group, Inc. (NYSE:GS) at a valuation of 10 times trailing earnings. That multiple would generally place a stock in value territory as long as its business was sustainable. Even if Goldman’s earnings growth last year was generally recovering from a poor 2011, as long as it can continue to generate a similar level of earnings per share it could be attractive at this price. Wall Street analysts expect just above $15 in EPS for 2014, making for a forward P/E of 10 as well. Goldman Sachs Group, Inc. (NYSE:GS) also trades right about at the book value of its equity; a bull would argue that the company’s strong brand among its customers merits a premium, while bears might argue that financials in general have overstated book values. Given the company’s success in generating income from these assets- as seen by the low earnings multiple- we would doubt that book values are very inflated.


We track quarterly 13F filings from hedge funds and other notable investors, using this information to develop investing strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). We can also use our database to see which filers had large positions in Goldman Sachs Group, Inc. (NYSE:GS) as of the end of December. We see that Boykin Curry’s Eagle Capital Management, even after cutting its stake in the investment bank, owned 2.6 million shares (find Eagle’s favorite stocks). Orbis Investment Management, managed by William Gray, was buying Goldman and reported ownership of 1.6 million shares (see Orbis’s stock picks).

Morgan Stanley (NYSE:MS) is Goldman’s closest peer in the sense of being a pure-play investment bank. Morgan Stanley trades at a discount: specifically, the forward earnings multiple is only 8 and the P/B ratio is 0.7 (reflecting that the market cap is significantly below the book value of Morgan Stanley’s equity). The bank did not have as good a year in 2012 as Goldman did, however, with trading revenues, commissions, and fees powering a 32% decrease in non-interest revenue. As such the stock is cheaper, but the business has been performing poorly.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!