Is Goldman Sachs Stock a Buy Sell or Hold?

When the Federal Reserve started hiking rates in 2022, banks’ unrealized losses hit a peak of $690 billion according to the Federal Deposit Insurance Corporation.

Now, as the Fed’s rate cuts have kicked in, banks have begun to recoup some of their losses by shifting funds from low-yielding investment securities to higher-yielding paper.

A beneficiary of the migration of capital has been Goldman Sachs (NYSE:GS). One of the frontrunners in the financial institution field, the company operates like a well-oiled machine and has been doing so for a long time.

Over the past five years, Goldman Sachs’ stock has gained more than 200%, which is almost double what the broader SPDR S&P 500 ETF Trust (NYSEARCA:SPY) posted over the same period. This year, the stock is facing some pressure and is down by almost 18% over the past month.

Now, Goldman’s valuation is quite reasonable with an 11.43x its forward non-GAAP earnings. If we factor in the growth, the forward PEG is just 0.79x. This is a little bit higher than what the industry is clocking, though.

So, should you consider investing in Goldman Sachs now, or wait for a better opportunity? Is an investment warranted now?

Goldman Earnings Soared by 77%

Last year was a banner year for Goldman after posting solid results. Management reported a 16% hike in its annual revenues to $53.51 billion. This was driven by the increase in net revenues from its global banking & markets segment and its asset & wealth management segment, both of which recorded a similar 16% increase in their top lines compared to the year prior.

Equity investments made by the firm over the past year did well, too, primarily those in private equities. So too were investment banking fees higher than the previous year, driving gains in the global banking & markets segment. This was due to Goldman Sachs recognizing significantly higher net revenues in underwritings for debt and equity.

Goldman also made huge strides on the profitability front with net earnings up a solid 71% from the prior year to $13.53 billion, which translated to a 77% leap in earnings per share to $40.54.

For Q4, management recorded a 23% jump in the overall top line to $13.87 billion, higher than the $12.39 billion that analysts had been forecasting. The $11.95 quarterly EPS was also larger than the $8.22 expected. 

What’s more impressive about Q4 results is the fact that expectations were eclipsed across the board. For instance, fixed-income trading clocked in $2.74 billion in revenue, above the Street estimate by almost $300 million, while the asset and wealth management segment’s $4.72 billion top line beat estimates by $560 million.

Generous Dividend a Reason to Buy?

Over and above all the reported growth, Goldman Sachs pays a generous dividend. The current quarterly dividend rate stands at $3 per share, translating to an annual rate of $12 per share yielding 2.26% at prevailing prices.

Although its dividend has grown significantly over the recent past, it has a low payout ratio of 31.5% suggesting that there is no threat to future payouts anytime soon.

Better still, the dividend streak has been unbroken for about 13 years. 

What Is Goldman Sachs Expecting Now?

Last year, Goldman Sachs was at the top of the list when it came to mergers and acquisitions (announced and completed) globally. This year, the company expects dealmaking to pick up pace.

Management is hopeful because it noticed that, despite major elections creating a host of volatilities in the market, mergers & acquisitions activity picked up by about 10% last year, and this year, this rate is expected to accelerate.

One of the primary reasons for this is the expected lowering of the interest rates by the Fed. What is giving wind to this idea is the fact that recent inflation numbers came in lower than expected.

At least for now, the momentum is on the side of the lowering of interest rates despite the Trump administration’s tariffs. Therefore, Goldman Sachs could be looking at more gains in the face now.

Is Goldman Sachs Stock a Buy Sell or Hold?

Goldman Sachs is a strong Buy according to analysts with upside of 19% to $642 per share, the consensus price forecast among 21 analysts.

It’s also trading at a low price-to-earnings ratio relative to future growth. And alongside a dividend north of 2.2% there is lots to like for both value investors and income-seekers alike.

If you were to look critically at the investment opportunity, some areas that need improvement to make a purchase even more attractive are the so-so cash flow health metrics, price momentum, and growth hovering around 5% for both the top and bottom lines.

Still, a P/E of 13x for a top tier bank like Goldman Sachs is not a multiple you can find all the time and signals that maybe, just maybe, it’s a steal at these prices.

If IPOs increase this year as management forecasts, the $14 billion in net income on $52 billion in sales posted last year may well be set to rise higher in 2025.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.