Before I get started on my analysis of GS, let me share my method of madness on how I rank stocks. I separate them from one another by taking into account the following criteria:
Performance: Short term, intermediate term and long term where possible. I compare the performance of the stock with its peers and against the other 3,565 stocks that I monitor.
Valuation: While I like performance, I have seen way too many momentum darlings come crashing back down to earth due to astronomical valuations. We have learned huge valuation lessons from incidents like the crash of the Nasdaq in 2000-2001, the crash of the housing market in 2006, and many other such bubbles. Valuation does matter!
A healthy stock chart: I don't like sideways trends (Apple would be a good example of this), I despise downtrends (Inverse ETF's would be a good example of this) and I get very nervous with extended uptrends, unless the valuation is still compelling. And of course, the most dangerous trend of all is a topping-out trend that is beginning to roll over.
Data from Best Stocks Now AppLet's start with performance of the stock. Again, I look at short-, intermediate- and long-term performance. Over the last 10 years, GS has delivered 8% per year to investors while the market has delivered 5%. Over the last five years, they've delivered 6% per year, while the market has delivered 8% during the same time frame. Over the last three years, GS has delivered 4% per year to investors while the market has delivered 14%. Over the last 12 months, GS is up 41%, while the market is up only 17%. When I rank the performance of Goldman Sachs against the other 3,500 or so that I follow, it only earns a performance grade of C. That sound pretty average to me. How can you expect above-average returns with average stocks? In my opinion, GS is NOT worthy of your investment based on performance. Now, onto valuation.
ValuationAlthough I do like to see momentum, I'm not solely a momentum investor. Nor am I a pure value investor. I like to combine momentum with value. Data from Best Stocks Now App The consensus analysts' estimates for GS's earnings next year currently stand at $15.44 per share. The consensus average five-year earnings growth estimate for GS is 5.3% per year. Given these expectations, the shares currently sport a PEG ratio of 1.95. PEG ratio is just one valuation measure, however.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV