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Goldman Sachs has been a company since 1869. They are an absolute powerhouse in the financial world, and they have dominated for quite sometime, but after all this time, is Goldman Sachs stock still worth buying?
I think that this is a very interesting question. As I look for more fintech companies to invest into, Goldman Sachs continues to be one that shows up in my research. At first, I dismissed the company. The reason for this is that my investing philosophy leads me to mostly invest into small cap stocks. I want to find young companies that I can hold till they are old. Goldman does not fit this criteria. However, after seeing it recommended so many times, I decided to do a detailed analysis of the company. I thought this would be interesting as my readers will now have the chance to see how I decide if a stock is a buy or not.
The first thing I noticed is that Goldman Sachs has a p/e ratio of 6. That's absolutely insane especially for today's market. Historically, the average p/e ratio for a company has been 10-15 and right now it is pretty far above that. A p/e ratio of 6 means that investors must not see high growth possibility for this company. I disagree heavily with this sentiment and the numbers prove that I am right. In 2020, Goldman brought in 41 billion dollars in revenue and around 9.4 billion in profit. In 2021, however, Goldman brought in 59 billion in revenue and 21 billion in profit. That's actually insane profit growth. One might be reading this and thinking that this new growth might be already factored into the share price, but if one looks at the stock growth over the last 5 years, I don't see how it's possible to think this.
Also, Goldman Sachs currently has a market cap of 120 billion dollars. If one had asked me yesterday to write down 5 guesses for the market cap of Goldman, every single guess would have been over 120 billion. That's insanely low for a company like Goldman and reflects the low p/e ratio. Yahoo Finance also has Goldman Sachs listed as an undervalued stock, and I have to agree with Yahoo on this.
Dividend fans will also be happy to see that Goldman offers a 2.20% dividend yield and shareholders enjoy making almost 60 bucks per share.
Goldman has, however, underperformed the S&P 500 over the last 5 years. While it is important to note that Goldman is heavily undervalued which could help explain why it has underperformed the S&P, it has underperformed with a beta of 1.49.
I would not be opposed to holding Goldman as a stock. It would be beneficial for me to have some stability in my otherwise volatile portfolio, and I think that holding Goldman would be a very low risk play.
If you liked my analysis of Goldman's stock, you should join my $5 a month stock advisor. I write about absolutely amazing publicly traded companies that you might want to check out. Join at www.patreon.com/financebycwt.
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