Wednesday, December 30, 2009

Let's talk about Goldman Sachs (US:GS).

The Goldman Sachs Group, Inc. (Goldman Sachs) is a bank holding company and global investment banking, securities and investment management firm that provides services worldwide to corporations, financial institutions, governments and high-net-worth individuals. Its activities are divided into three segments: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.

Here's my analysis for Goldman Sachs (US:GS). All currency shown is in US$.

GS is a fundamentally sound. Her diluted EPS for the first three quarters are $3.39, $4.93, $5.25, which adds up to $13.57. My estimate for their 4th quarter earnings should be about $5, and FY 2009 to be about $18. Using the current price of $165, the P/E ratio is only 9.16. This is way too low, compared to their 9-year average P/E of 17.1. If we take the average P/E to multiply by EPS of $18, the fair price should be $307. Even if I mulitipy by only P/E of 12, the fair price should be at $216. Initial earnings if we buy GS at $165 is between 10.9%.

GS's Book value at 3rd Quarter 2009 was $127.38. Hence the Returns on Equity is about 14.1%, which is 0.4% lower than the 9 year average RoE of 15.7%. Hence, I would say GS's management is doing a very good job in a drastic year.

Take note: Estimated numbers are according to my own analysis. It does not represent the actual results of GS which is out second week of January 2010.

Watch this video:

Kindly share your views.

No comments:

Post a Comment