Goldman Sachs (GS) vs Charles Schwab (SCHW): Which is a Better Stock to Buy?

The Goldman Sachs Group, Inc. (NYSE:GS) closed at $902.56 on October 2, and The Charles Schwab Corporation (NYSE:SCHW) at $96.70.

Both grew earnings sharply last quarter. Both are priced as though that will not continue. What separates them is where the money comes from, and one of the two has the steadier source.

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Schwab Keeps More of What It Earns:

Compare the margins before anything else. Schwab keeps 38.79% of revenue as net profit and 52.28% at the operating line. Goldman keeps 31.04% and 42.18%.

Schwab is the more profitable business on every dollar it collects, which is not what most people would guess between a custodian and an investment bank. The return on equity goes the same way, at 20.27% against 16.90%.

So Schwab is more profitable per dollar of revenue and better at turning capital into profit. That is two of three questions settled in one direction. Growth is the third,, and it splits. Goldman grew revenue 42.50% in the most recent quarter against 20.90% at Schwab, and earnings 78.00% against 31.70%. Goldman grew faster. The question is whether that growth is the kind that repeats.

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The Revenue Behaves Differently:

An investment bank earns fees when deals happen. Advisory work and trading depend on activity the bank does not control, and 42.50% revenue growth is what a busy market produces. The same figure appears in reverse when markets go quiet.

Schwab earns most of its money from holding client assets and the cash inside them. Those balances do not disappear when deal activity stops, which is why its 20.90% growth is more repeatable.

The balance sheets are funded very differently. Goldman carries debt-to-equity of 725.38% against 151.11% at Schwab, so its leverage is nearly five times as large. Both readings are normal for financial companies, and neither compares to an industrial balance sheet.

Operating cash flow is where Goldman looks strangest. It was negative $39.36 billion over the past twelve months against $11.42 billion positive at Schwab. For a trading business that reflects positions rather than losses, and it is why no enterprise value figure exists for either.

Neither of these two is bought primarily for the yield. If you’re interested in ten dividend stocks that beat the market this year, we have ranked them here.

The Valuation Case:

Goldman closed at $902.56 on October 2 after rising 13.28% over twelve months. Schwab closed the same day at $96.70, up 2.87%. Sustainability favors Schwab, because fees on assets held recur and fees on deals completed do not.

On price, Goldman is cheaper on every measure that works for both. It trades at 14.66 times trailing earnings against 18.12 times, 12.80 times forward against 12.89 times, and 2.52 times book against 3.92 times. Book value is the fairest comparison for financial companies, and on that basis Goldman costs roughly two-thirds of Schwab.

Income splits them again. Goldman yields 2.22% against 1.32%. Schwab’s PEG ratio of 0.84 sits below one against Goldman’s 1.17, which is the one measure pointing the other way.
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Conclusion:

Goldman is the better of the two on price. It trades at 2.52 times book against 3.92 times, yields considerably more, and grew revenue twice as fast last quarter. However, Schwab earns a wider margin and a higher return on equity. It earns both from assets under custody rather than from deals that have to keep happening. An investor choosing Goldman is being paid a discount to accept revenue that arrives in waves, which is a reasonable trade at two and a half times book and a poor one at four.

Market Sentiment:

The Goldman Sachs Group, Inc. was held by 92 hedge funds with a combined stake value of about $11.22 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 83 hedge fund holders with a cumulative investment value of around $8.79 billion in the previous quarter.

The Charles Schwab Corporation was held by 95 hedge funds with a combined stake value of about $10.19 billion at the end of the same quarter. This is down from 101 hedge fund holders with a cumulative investment value of around $10.00 billion three months earlier.

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This article is originally published at Insider Monkey.