The Goldman Sachs Group, Inc. (NYSE:GS): Earnings Expected To Remain Subdued

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The most recent earnings update The Goldman Sachs Group, Inc.’s (NYSE:GS) released in December 2018 revealed that the company gained from a significant tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts predict Goldman Sachs Group’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Goldman Sachs Group

Market analysts’ consensus outlook for the coming year seems pessimistic, with earnings reducing by -6.1%. Beyond this, earnings are expected to continue to be below today’s level, with a decrease of -4.3% in 2021, eventually reaching US$9.4b in 2022.

NYSE:GS Future Profit February 6th 19
NYSE:GS Future Profit February 6th 19

While it is informative understanding the growth rate each year relative to today’s value, it may be more insightful to analyze the rate at which the business is growing on average every year. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Goldman Sachs Group’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -1.4%. This means, we can presume Goldman Sachs Group will chip away at a rate of -1.4% every year for the next couple of years.

Next Steps:

For Goldman Sachs Group, there are three essential aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is GS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GS is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.