Shareholders in The Goldman Sachs Group, Inc. (NYSE:GS) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.
After the upgrade, the consensus from Goldman Sachs Group's 19 analysts is for revenues of US$50b in 2021, which would reflect a noticeable 2.6% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to step up 12% to US$45.35. Prior to this update, the analysts had been forecasting revenues of US$43b and earnings per share (EPS) of US$32.37 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$374, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Goldman Sachs Group, with the most bullish analyst valuing it at US$468 and the most bearish at US$269 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.5% by the end of 2021. This indicates a significant reduction from annual growth of 7.5% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.7% per year. It's pretty clear that Goldman Sachs Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Goldman Sachs Group.
Analysts are definitely bullish on Goldman Sachs Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including recent substantial insider selling. You can learn more, and discover the 2 other concerns we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you decide to trade Goldman Sachs Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.