The Goldman Sachs Group Inc.’s stock price has surged to a price of $324.3 today. Ending the day with a 3.4% increase, GS shares outperformed the S&P500 and Dow Industrial composite indices by 3.0% and 2.0% respectively, closing in on their 52 week high of $389.58 Over the last 12 months, Goldman Sachs is up 5.6%, and has outperformed the S&P 500 by -10.0%. Now, the large-cap Finance company is 15.6% below its average target price of $384.22 and has an average analyst rating of buy.
Goldman Sachs's trailing 12 month price to earnings (P/E) ratio is 11.5, which is its share price divided by its trailing earnings per share (EPS) of $28.09. The company has a forward P/E ratio of 8.7 based on its forward EPS of $37.45 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Finance sector is 14.34, but a company's price can remain stable for a long time even if it is over or undervalued.
An alternative form of measuring a company's valuation is to focus on its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. Book value represents the amount of money that would be available to equity holders if the company were to sell all of its assets and pay off all of its debts today. Goldman sachs's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 1.0, indicating the company may be undervalued compared Finance sector’s average P/B ratio of 1.57.
GS's average free cash flow over the last few years is $-849500000.0, which represents the sum of inflows and outflows of cash from all sources, including capital expenses.. This is the pool of liquidity that the company can use to reinvest in its business or pay out to its equity investors in the form of a dividend. Over the last twelve months investors in Goldman Sachs have enjoyed a dividend yield of 3.0%.
Since it has a a very low P/E ratio, a lower P/B ratio than its sector average, an unconvincing cash flow history, and decent net margins, Goldman Sachs is probably fairly valued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!
