Last January I sold 1/2 of my position in GS. Since then I have slowly added back GS to my portfolio. In August I added 1/4 of a position at $116.47 and today another 1/4 at $93.
The rationale for purchasing more GS in August, still holds true today. I’m now buying because of an increase in buzz about mergers and acquisitions. Today for example there are 11 major deals on the table.
Credit Suisse has a $170 twelve month target on GS stating:
“We rate Goldman Sachs shares Outperform. While it’s been a challenging call, we view GS as a best-in-class brokerage franchise with solid market positioning across myriad businesses and a strong balance sheet. With a proven ability to gain and sustain client market share across the franchise and a long track record of performance and return, we expect Goldman will continue to deliver fundamental results that are at the high end of the peer group. We believe this should sustain premium-to-peer earnings and book value growth over the course of the cycle.”
The Street Rates GS a ‘C’ HOLD stating:
We rate GOLDMAN SACHS GROUP INC (GS) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company’s strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and a generally disappointing performance in the stock itself.
Ford Rates GS a Hold stating:
Goldman Sachs Group Inc.’s earnings have declined to an estimated $8.92 from $19.52 over the past 5 quarters, however they have shown strong acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates an improvement in future earnings growth may occur.
Revenue per Employee
GS is doing a good job in comparison to its peers with a Revenues Per Employee, Return on Equity, and Return on Assets of $1,240,252, 8.70%, and 0.89% respectively. Despite average performance at managing their resources and at managing their owner’s equity, the company is among the best at generating revenues from employees compared to other companies in the Investment Services industry.
GS seems fairly valued with a PEG of 1.0651 that is inline with the Investment Services industry median of 1.12, however their PE is only 9.6165, below the industry median of 12.13.
Good Profit Margin
GS converts an above median percentage of its revenues to profits compared to other companies in the Investment Services industry. Furthermore, the company is profitable with an operating margin of 26.96%.
GS pays an annual dividend of $1.40 which, at its current stock price, produces a yield of 1.43%. This is below both the Investment Services industry and S&P 500 average’s at 5.30% and 2.22% respectively. However, most other companies in the Investment Services industry do not even pay a dividend.
GS is one of the most highly leveraged companies in the Investment Services industry and has a Debt to Total Capital ratio of 80.85%. Additionally, the percentage of debt used in its capital structure grew this year.
Goldman Sachs Group is a bank holding and financial holding company. Through its subsidiaries, the company provides financial services to corporations, financial institutions, governments and individuals. The company’s activities are divided into four segments: Investment Banking, which provides investment banking services; Institutional Client Services, which facilitates client transactions; Investing & Lending, which invests in and originates loans to provide financing to clients; and Investment Management, which provides investment