This Stock Is a Buy — Even After a Disappointing Quarter

Jan 24, 2022

This Stock Is a Buy — Even After a Disappointing Quarter

Goldman Sachs Group is coming off a record-breaking year in which it made $21 billion — more than double what it earned in the pre-epidemic year of 2019.

Investors are not in a jubilant mood. Goldman shares (GS) plummeted 10% this week, bringing them to a 19% loss to their November high, after the company's fourth-quarter earnings of $10.81 per share fell short of forecasts for the first time in seven quarters.

The selloff is an excellent chance to acquire shares in Wall Street's most prominent investment bank and trading house at a discount. Goldman was Barron's best stock choice for 2021, returning 47.6 percent, and the company appears to be on track for another successful year.

At a recent $345, the stock trades at less than nine times estimated 2022 earnings of around $40 per share and at less than 1.2 times year-end 2021 book value of $284 per share. This is a significant discount to competitors Morgan Stanley (MS) and JPMorgan Chase (JPM), which trade at around 13 times anticipated 2022 profits and roughly double book value, despite identical fourth-quarter returns on equity.

Goldman, like those Wall Street titans, has profited handsomely from trading bonds, currencies, commodities, and stocks. Goldman, on the other hand, is more reliant on such trading and investment banking than its competitors. As a result, its earnings may become more variable and unpredictable.

This chart compares Goldman Sachs to its banking counterparts.

https://liquidity-provider.com/app/uploads/2022/01/unnamed-37.png

Even if markets return to more normal state, if less lucrative, levels, "Goldman's earnings should be much greater than they were prior to the epidemic," Devin Ryan, an analyst at JMP Securities, argues. On the stock, he has an Outperform rating and a $460 price target.

Ryan asserts that the corporation is receiving little credit for some of its more recent ventures, most notably Marcus, a digital consumer banking franchise with more than $100 billion in deposits, 10 million clients, and $1.5 billion in income in 2021. Goldman does not publish its consumer bank's profitability. However, public digital banks are valued at a multiple of revenue, implying that the Goldman platform is worth at least $10 billion.

Additionally, the firm has a rapidly increasing business managing alternative assets for customers, including private equity. With $2.5 trillion under management across a number of platforms, its asset management division may be worth $30 billion or more, or almost a fourth of the firm's market value.

These companies contribute significantly to Goldman's objective of diversifying its revenue stream.

Investors continue to face difficulties. Despite its expanding consumer business, Goldman is not betting on higher interest rates, as other banks do.

Another concern is that Goldman's spending are increasing rapidly, notably pay, which increased 33% to $17.7 billion last year. Investors are concerned that the corporation would have to pay a higher price to recruit and retain talented employees .

Goldman downplays these worries.

"As a result of our pay-for-performance attitude, remuneration is flexible in both directions," Goldman's chief financial officer, Denis Coleman, tells Barron's. "If this year is not the same as 2021, we may remove it."

By the end of 2022, Goldman's book value might reach $310 per share, implying that the company trades at 1.1 times ahead book value. This implies that there is little disadvantage. Intangible assets account for approximately 5% of the book value. Additionally, the business adheres to the traditional concept that continually increasing book value is a critical corporate objective.

Goldman is likely worth far more than book value, given its lucrative capital-light businesses, such as investment banking and asset management. Earnings of $40 per share in 2022 would be quite fascinating—nearly double the level in 2019—and would translate into a good return on equity of roughly 14%. In 2021, Goldman earned a record $59.45 per share.

Its shares currently yield 2.3 percent following a 60 percent increase in the dividend in 2021. Another dividend rise in 2022 is a great strong bet.

Goldman is scheduled to inform investors in February on its early 2020 strategic plans. It has thus far succeeded in achieving its three primary objectives of developing and enhancing existing businesses, diversifying its business mix, and increasing previously unsatisfactory profits. Investors will be watching to see if Goldman increases its target return on equity, which is now set at 13%. "We have a top-five asset manager as part of Goldman Sachs," Coleman explains. Within Goldman Sachs, we have a consumer digital bank with distinct products that is growing. Within Goldman Sachs, we have a world-class investment bank and a world-class sales and trading business."

The aggregate of those components is almost certainly substantially more valuable than Goldman's current market capitalization of $120 billion. Its franchise continues to grow in strength.

Subscribe Our Newsletter

Stock Market Predictions 2024

Milena

Stock Market Predictions 2024:  Stocks Finish Higher and Continue Rally on Fed Rate Reversal

The Bank of Japan followed the Fed's dovish lead on Tuesday, sparking a worldwide market surge linked to expectations on easy central-bank policy next year causing new stock market predictions 2024.

Stock Market Forecast
Hong Kong Billionaire Loses Half Her Fortune on China Probe
Hong Kong Billionaire Loses Half Her Fortune on China Probe

Huabao International Holdings Ltd. plunged a record 67% in Hong Kong trade after the company's disclosure that Chairwoman Chu Lam Yiu was under investigation for possible disciplinary infractions.

Banks and Finance
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Alexander

How Many Days a Year the Stock Market Is Up? – An Investor’s Guide to Long-Term Success
Amidst recent market fluctuations, it is natural for investors to feel uncertain about the future. While it may be tempting to react to short-term swings,  it is essential to remember that the stock market is a long-term game that requires patience and discipline.

discover
Energy Trading: What Is It And How To Get Started?

Alexander

Energy Trading: What Is It And How To Get Started?

Energy trading is an extremely dynamic and profitable sector for growing your investment portfolio. This is not surprising, as oil, gas, and electricity are considered the most essential resources in today's energy-driven global economy. According to the American Petroleum Institute, the oil and gas sector accounts for about 8% of the United States' GDP.

Trading
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap

    Vitaliy

    Triangle Patterns in Trading: Mastering Ascending, Descending & Symmetrical Strategies for Maximum Profit

    Triangle Patterns in Trading: Ascending, Descending & Symmetrical Guide

    Alexander

    What Is COTI? Payments, Token & Price Prediction

    What is a COTI coin

    Constantine

    Best Copy Trading Software in 2025

    Best Copy Trading Software in 2025

    Alex

    What Is an AI Agent? The Future of Finance Explained

    AI Agent Explained

    Constantine

    How to Start a Liquidity Provider Business?

    How to Start a Liquidity Provider Business

    Constantine

    How to Start a White Label Brokerage?

    How to start a white label brokerage

    Constantine

    How to Start a Multi-Asset Brokerage?

    How to Start a Multi-Asset Brokerage

    Hazem

    Crypto Ransomware – How They Happen and How to Avoid Them

    Crypto ransomware explained

    Constantine

    Best Web3 Browsers in 2025

    Best Web3 Browsers

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained

    Alexander

    How to Scale a Crypto Exchange Business and Stay Competitive

    how to scale crypto exchange business

    Constantine

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Alexander

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Hazem

    Megaphone Pattern​: What Is It? How to Use It In Trading

    Megaphone Pattern​: How to Read & Trade with It

    Constantine

    Top 5 Liquidity Bridge Providers in DeFi

    Top 5 Liquidity Bridge Providers in DeFi
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.