Goldman Sachs, at its current market capitalisation of approximately 119 billion USD, is significantly undervalued.
According to my estimates, the intrinsic value of Goldman Sachs is 230 billion USD. Even at a hypothetical 230 billion market capitalisation, at the current pace of revenue and net profit margin Goldman Sachs will trade at Price/Earnings ratio of around 10 which is low even for a value sector like financials nowadays.
Goldman Sachs's full year 2021 earnings exhibit a net profit margin of 34 %, which is the highest it has been for years. And at a return on equity of 23 % Goldman Sachs is close to shattering historic records. Just 5 to 7 years ago most global investment banks were finding it extremely difficult to achieve double digit, above 10 %, return on equity.
Yes, the current investment banking environment also seen in the whole of 2021 is unlikely to last, but even at lower level of business, investment banking and its epitome Goldman Sachs have room to enhance wealth creation.
No comments:
Post a Comment