Are Goldman Sachs Shares Still a Good Bet After Surging 64% in 2024?

If you are trying to figure out what to do about Goldman Sachs Group stock right now, you are far from alone. After all, sitting at a recent closing price of $802.51, the stock has been on an eye-catching run. Over just the past year, shares have surged 64.3%, which is impressive by any standard, and zooming out to the last five years, Goldman Sachs has delivered a whopping 352.3% return. Even in the past month, the stock tacked on a solid 7.0%, despite a minor dip of -0.3% in the last week. When you step back and look at these numbers, it is clear that investors are seeing something they like. Some of this momentum has been fueled by optimism about the broader market and renewed enthusiasm for the financial sector. These trends can shift quickly as investors react to interest rate moves and expectations for global economic growth.

Of course, past performance is only one part of the story. Plenty of fast-moving stocks have run up ahead of their underlying business, while others remain undiscovered bargains. That is why a closer look at valuation really matters. By our scorecard, Goldman Sachs is currently undervalued by 3 out of 6 industry-standard checks, giving it a value score of 3. But how does that compare to the usual tools used by analysts, and what else should investors keep in mind? Let us dig into the different approaches to valuation, and then I will share a perspective even more powerful than the usual number crunching.

Goldman Sachs Group delivered 64.3% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Goldman Sachs Group Excess Returns Analysis

The Excess Returns model examines how much profit a company generates over and above its cost of equity. This approach focuses on whether Goldman Sachs is earning more from its invested capital than is needed to reward shareholders for their risk, which is a key sign of long-term value creation.

For Goldman Sachs, the model estimates a Book Value of $344.06 per share and a Stable Earnings Per Share (EPS) of $54.06, based on future Return on Equity projections from 13 analysts. The company’s average Return on Equity is strong at 14.61%. With a Cost of Equity of $36.09 per share, this results in an Excess Return of $17.97 per share. Over time, Goldman’s Stable Book Value is projected at $370.15, using weighted analyst estimates from 14 sources.

Overall, the Excess Returns model estimates an intrinsic value of $639.51 per share. With Goldman Sachs stock trading at $802.51, this suggests the stock is currently about 25.5% overvalued compared to its forecast excess returns.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Goldman Sachs Group.

Our Excess Returns analysis suggests Goldman Sachs Group may be overvalued by 25.5%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Goldman Sachs Group Price vs Earnings

For established, profitable companies like Goldman Sachs, the Price-to-Earnings (PE) ratio is a widely recognized way to value the business. The PE ratio gives investors a sense of what the market is willing to pay today for a dollar of earnings. This makes the ratio especially useful for firms with stable profits.

What counts as a “normal” PE ratio varies with expectations for future growth and risk. Companies expected to grow rapidly, or ones seen as less risky, generally trade at higher PE ratios. In contrast, mature firms or those facing more uncertainty tend to be valued at lower multiples.

Goldman Sachs currently trades at a PE of 17.27x, which is significantly lower than the Capital Markets industry average of 27.17x and even more so compared to peer companies, which average 34.81x. This might look attractive at first glance and may suggest potential undervaluation.

However, Simply Wall St’s "Fair Ratio" goes a step further by tailoring the benchmark specifically for Goldman Sachs. It incorporates more than just industry comparisons and also considers the company’s forecast earnings growth, risks, profit margins, market capitalization, and sector dynamics. This approach provides a more nuanced and accurate view than a simple peer or industry average.

The Fair Ratio for Goldman Sachs is 20.08x, only a few points above the current 17.27x. The gap is modest and well within a reasonable valuation range for a company of this quality, suggesting the market is mostly in agreement with the company’s prospects.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Goldman Sachs Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a framework that helps you connect the story you believe about a company to its projected financials. This approach translates your perspective on key drivers, such as future revenue, earnings, and margins, into an actionable fair value.

Rather than just looking at backward-looking ratios, Narratives invite you to outline how specific business events, trends, or risks might shape Goldman Sachs Group’s future and then see how those beliefs impact its estimated worth. This is a dynamic, accessible approach available on Simply Wall St’s Community page, where millions of investors exchange and debate their views in real time.

Comparing your Narrative’s fair value to today’s share price can highlight whether you see Goldman Sachs Group as a buy, hold, or sell. Because Narratives update automatically with new data or news, you can react quickly as the story evolves. For instance, some investors believe recent M&A momentum and digital transformation will propel Goldman to a fair value as high as $815.00, while others see greater risks and assign a value closer to $538.00.

Do you think there's more to the story for Goldman Sachs Group? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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