NEW YORK ( TheStreet) -- Goldman Sachs Group (NYSE: GS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and deteriorating net income. Highlights from the ratings report include:
- GOLDMAN SACHS GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GOLDMAN SACHS GROUP INC reported lower earnings of $4.41 versus $13.14 in the prior year. This year, the market expects an improvement in earnings ($12.31 versus $4.41).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 22.6%. Since the same quarter one year prior, revenues fell by 13.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- GS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.69%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, GOLDMAN SACHS GROUP INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff