GS Goldman Sachs
Elite franchise priced for perpetual peak returns; cycle normalization caps upside.
The story
Elite capital-markets franchise with durable FICC and advisory moats, but trailing 16.5% ROE reflects a strong IB/FICC cycle unlikely to persist at peak. Book equity has grown meaningfully, supporting a higher base, but market price at ~2.5x book still bakes in mid-teens returns forever — the cycle will bite.
Holding all prior drivers: trailing 16.5% ROE is cyclical strength, not a new normal — capital-markets ROE mean-reverts to low-teens through a full cycle. Book growth at 6% near-term reflects retained earnings at elevated returns, tapering to 4.6% (below risk-free) as competition and regulation constrain balance-sheet expansion.
Value drivers
| Return on equity (normalized) | 13.0% |
| Book-value growth (Y1) | 6.0% |
| Terminal book growth | 4.6% |
| Beta | 1.35 |
| Failure probability | 0.5% |
| Cost of equity | 11.0% |
Valuation bridge
| PV of excess returns | 15.78B |
| PV of terminal excess | 19.92B |
| Equity value | 144.80B |
| ÷ shares → per share | $497.30 |
News
bearish -0.20 · 8 articles
- Goldman Sachs drops one stat testing the S&P 500 bull case
- Jefferies to Benefit From Increased Investment Banking Momentum, Oppenheimer Says
- Goldman Sachs Drops as Fed Rate-Hike Call Adds October Risk
- Goldman Sachs Stock Is Worth a Look Now That Its Tech Glow Has Faded
- A New Investing Trend Is Emerging -- And Not Everyone Is Comfortable With It
- 9.50x Earnings: Is PayPal the Cheapest Stock in Fintech, or a Trap?
- Goldman Sachs CEO Flags Unexpected $500 Million Hit
- Will Higher Costs and Softer FICC Weigh on Goldman Q3 Momentum?
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 109.82B | 13.0% | 2.17B | 1.96B |
| 2 | 116.41B | 13.0% | 2.30B | 1.87B |
| 3 | 123.21B | 13.0% | 2.44B | 1.78B |
| 4 | 130.22B | 13.0% | 2.58B | 1.70B |
| 5 | 137.43B | 13.0% | 2.72B | 1.61B |
| 6 | 144.82B | 13.0% | 2.86B | 1.53B |
| 7 | 152.38B | 13.0% | 3.01B | 1.45B |
| 8 | 160.10B | 13.0% | 3.17B | 1.37B |
| 9 | 167.96B | 13.0% | 3.32B | 1.30B |
| 10 | 175.95B | 13.0% | 3.48B | 1.22B |
Key risks
- IB/FICC revenue normalization as cycle cools
- Regulatory capital constraints on balance-sheet growth
- Credit cycle deterioration in lending book
Catalysts
- Rate-cut cycle reviving advisory and ECM volumes
- Buyback acceleration if capital rules ease
- Wealth management scaling to diversify revenue mix