Is Goldman Sachs Still Attractive After Its 64% Gain and Latest Earnings Beat?

Thinking about whether to buy, hold, or just watch Goldman Sachs Group stock? You are not alone. After all, this is a company that has delivered jaw-dropping gains over the past several years. If you had invested just five years ago, you would be looking at a remarkable 319.3% return, with a one-year surge of 64.4% and a strong 38.6% gain since the start of the year. Even after a minor dip of 0.9% in the past week, the stock remains firmly in growth territory.

But what is driving these moves? Much of the momentum reflects broader optimism in the financial sector and a shift in how investors perceive risk in major Wall Street banks. Developments in global markets, shifts in interest rates, and evolving regulations have all contributed to the long-term rally. Lately, even as some uncertainty has crept in, Goldman Sachs continues to hold its ground among top names in global finance.

For anyone weighing an investment, though, past performance is only part of the equation. The real question is whether the current price still offers value. According to our six-point valuation check, Goldman Sachs is undervalued in 3 out of 6 areas, earning a value score of 3. That is neither a screaming bargain nor an overpriced risk. This makes for an intriguing case to dig deeper.

Let us break down each valuation approach to see what is driving this score. At the end, we will explore a more insightful way to measure true value beyond the standard metrics.

Goldman Sachs Group delivered 64.4% 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 evaluates whether Goldman Sachs Group creates value above what shareholders require for their investment. It does this by looking at how much return the company generates on its equity relative to the cost of that equity, capturing whether ongoing operations justify the stock’s price.

Goldman Sachs posts an average return on equity of 14.73%, with a projected stable earnings per share of $54.73, based on estimates from 13 analysts. The current book value per share stands at $344.06, with stable book value expected to reach $371.48, also at the consensus of analysts. With a cost of equity calculated at $36.47 per share, the resulting annual excess return is $18.26 per share. This indicates the firm does deliver meaningful value above its capital costs.

Despite these positive excess returns, the model estimates an intrinsic value below the current share price. This implies that Goldman Sachs stock is trading at a 24.0% premium relative to this measure. In other words, the stock is considered overvalued on this basis.

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 24.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Goldman Sachs Group Price vs Earnings (PE)

The price-to-earnings (PE) ratio is a widely used metric for valuing established, profitable companies like Goldman Sachs Group because it directly relates a company’s market price to its earnings power. It offers a straightforward way for investors to assess what the market is willing to pay for each dollar of current earnings.

Generally, companies expected to grow faster or seen as less risky can sustain a higher PE ratio, while those with lower growth or higher risk command a lower one. Therefore, it is important to compare a company’s PE not just with peers, but also in light of its unique growth outlook and risk profile.

Goldman Sachs is currently trading at a PE of 17.1x. This is well below both the industry average of 27.0x and the average among its peers at 37.9x. However, rather than relying solely on these broad measures, Simply Wall St’s proprietary Fair Ratio provides a more nuanced benchmark. The Fair Ratio for Goldman Sachs stands at 21.0x, carefully calculated by factoring in growth forecasts, profit margins, industry characteristics, company size, and specific risks.

This Fair Ratio is more tailored to Goldman Sachs’ situation than a generic comparison because it reflects what a rational investor might expect given all the moving pieces unique to the business. With the current PE of 17.1x sitting slightly below the Fair Ratio of 21.0x, Goldman Sachs appears undervalued on this basis.

Result: UNDERVALUED

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 a smarter way to understand valuation. Let us introduce you to Narratives. A Narrative is simply your story about a company, where you connect your assumptions about its future—such as how much it will earn, what its margins will be, or how fast it will grow—with your view of what the stock should be worth today.

Instead of relying solely on historic metrics, Narratives let you build your own forecast for Goldman Sachs Group by combining your expectations with real business drivers. On Simply Wall St’s Community page, you can easily create or explore these Narratives, joining millions of investors who anchor their buy or sell decisions in a transparent, tailored approach. Each Narrative links your personal outlook with a fair value calculation and updates dynamically as news and earnings are released, so your decisions are always grounded in the latest facts.

For example, one investor sees accelerating digital transformation and M&A activity driving robust, stable earnings and arrives at a fair value above $800. Another investor takes a more cautious view on regulatory risk and industry disruption, putting fair value closer to $540. This demonstrates how Narratives empower you to act on your own convictions, not just consensus estimates.

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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