Goldman Sachs (GS - Free Report) can be a solid bet now on the back of its leading global position in completed mergers and acquisitions in 2017. The company’s strong client activity amid volatile markets is expected to yield positive results for the stock. In addition, interest rate hikes and improving economy are anticipated to further boost profitability.
Analysts seem to be optimistic about the company’s prospects as the stock has been witnessing upward estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for the current year has risen nearly 7.2% to $24.99 and 2.9% to $25.70 for 2019. Backed by these upward estimate revisions, the company carries a Zacks Rank #2 (Buy), at present.
Additionally, Goldman’s shares have rallied slightly over the past three months as against the 6.8% decline recorded by the industry.
With $968.6 billion in assets as of Jun 30, 2018, Goldman’s strengths include effective cost management, business diversification and steady capital-deployment activities.
7 Reasons Why Goldman is an Attractive Pick
Revenue Growth: Goldman continues to make steady progress toward improving its top line. The company’s projected sales growth (F1/F0) of 13.55% (as against 3.15% industry average) indicates constant upward momentum in revenues.
Earnings Per Share Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 26.45%. In addition to this, Goldman recorded an average positive earnings surprise of 20.75%, over the trailing four quarters.
Prudent Expense Management: Though expenses have witnessed a volatile trend in the last few years, Goldman has been benefiting from its successful expense-reduction initiatives. Notably, the company completed an expense initiative and generated nearly $900 million of run-rate savings.
Diversification: While overall revenues have been affected by unfavorable market conditions over the last few quarters, Goldman remains well positioned for growth, backed by its sound investment banking operations and solid client franchise. In traditional banking, a diversified product portfolio has higher chances of sustaining growth than many other banks.
Notably, Goldman has been undertaking initiatives to fortify the GS Bank’s business by acquiring the online deposit platform of GE Capital Bank in April 2016. It also launched a digital consumer lending platform — Marcus by Goldman Sachs. Moreover, the company is likely to benefit from its exposure to the fast growing exchange-traded funds (ETF) market.
Steady Capital Deployment: Goldman remains focused on managing its capital levels efficiently and has consistently enhanced shareholders’ value with steady capital-deployment activities. Its 2018 capital plan won conditional regulatory approval. However, the bank is conditioned upon returning not more than $6.3 billion of capital, beginning third-quarter 2018 to second-quarter 2019. The capital plan provides for up to $5 billion in common stock repurchases and $1.3 billion in total common stock dividends, including an increase in the company’s common stock dividend of 5 cents to 85 cents per share in second-quarter 2019.
Stock is Undervalued: Goldman has a P/E ratio of 9.51 compared to the industry average of 15.47. Further, the company has a P/B ratio of 1.19 compared to the industry average of 1.88. Based on these ratios, the stock seems undervalued.
Superior Return on Equity (ROE):Goldman’s ROE of 13.58% compared with the industry average of 11.47% underlines the company’s commendable position over its peers.
Organic growth, expense management, robust capital position and steady capital-deployment activities continue to support Goldman’s growth opportunities. Furthermore, business diversification remains a key strength for earnings stability.
Other Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 1.5% in the past three months. It sports a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped around 1% over the past three months. It currently carries a Zacks Rank #2.
SunTrust Banks, Inc. (STI - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has rallied more than 5.2% over the last three months. It currently sports a Zacks Rank of 1.
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