Goldman Sachs Valuation!

Dear Reader,


Here I am going to make an attempt to value the Goldman Sachs Group, Inc. the New York City based global leading investment bank that is trying to reinvent itself from an investment bank into a corporate and retail bank next to its investment banking business.

I think Goldman Sachs, currently valued at 88.33 bln. USD by public markets, is undervalued by circa 10%. Why? Because the revenue of Goldman Sachs is still growing, albeit slowly, the bank exhibits very high net profit margin and its Price/Earnings ratio at 11.86 and its Price/Book ratio at 1.15 are low both compared to competitors currently and in a historical context.

Goldman Sachs' main business of securities trading, investment banking and merchant banking is sound. Overall, Goldman Sachs' revenue is still growing, but the revenue from securities trading, fixed income, currencies and commodities especially, is either shrinking or growing slowly. Goldman Sachs has recently pinned its hopes on merchant banking - the practice of buying, holding and eventually selling stakes in nonpublic companies. What is more, Goldman Sachs has been trying to reinvent itself into a corporate and commercial bank by offering more traditional banking services like loans and deposits. The fourth quarter 2019 and full year 2019 earnings of Goldman Sachs have not been spectacular. Its other recent earnings announcement have also been lackluster. I think that eventually Goldman Sachs will make moderate inroads into corporate and retail banking, which will ultimately expand its market capitalization and earnings potential in the long run.

All in all, however, Goldman Sachs remains a leading global investment bank with a sound business, producing growing, recurring, predictable revenue and a good dividend yield. That is why I thnik, based on its current market capitalization, Goldman Sachs is undervalued by 10%.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich