In this article I am going to analyze Goldman Sachs Group Inc Stock which its ticker (GS). In this analysis I am not going to use the earning per share and its growth rate and the (P/E) ratio, Instead I am going to use something is more helpful to analyze financial organization which is Price/Book value ratio.
First let us see what is the growth rate of GS’ Book or equity value through the last five years:
As you can see the eaquity increased from year 2019 where it was 90,265 Million until it reached 117,189 Million in 2022 with growth rate equal to 9.09%.
Now that we have the growth rate of GS equity in the last years, we are going to use this growth rate to estimate what will its equtiy be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = GS ‘s Equity in year 2022 = 117,189 Million.
- i = growth rate of Dow sales estimated above = 9.09%%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with GS’s Equity in year 2027 equal to 181,055 Million$.
Second, we need to find how much the equity per share will be in 2027 and all what we need to do is to divided the estimated equity above for year 2027 by the total number of shares for GS and that will equal to:
(Equity/Share)= (181,055 million) / (335.42 Million) = 509.4
Now we will see how does the (Price/Book or equity) ratio was doing in the last five years:
Now we can estimate two scenarios for GS stock price which is Bull market and the bear market.
For Bull market, I am going to take the highest (P/B) ratio which was 1.15 in year 2021, to see what will be the price of GS stock in 2027:
Bull market GS Stock’s price in 2027= (1.15)*(509.4) = 585.81$.
For Bear market, I will take the lowest (P/B) ratio which was 0.71 in year 2020, to see what will be the price of GS stock in 2027.
Bear market GS Stock’s price in 2027= (0.71)*(509.4) = 361.67$.
As of writing this article, Goldman Sachs Group Inc stock price is 357.09 $ which is below both Bull market estimated price and Bear market estimated price, therefor, I believe GS’s stock is a good opportunity for investment.
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