Insights

• Goldman Sachs exhibits strong profitability, with a net profit margin significantly exceeding the industry average, but its reliance on debt financing poses a significant risk due to high financial leverage.
• The company's liquidity position is weaker than its peers, as indicated by a current ratio below the industry average, but its liquidity has been improving.
• Management's focus on improving returns in Asset & Wealth Management and achieving operating efficiencies is expected to drive future growth, but the company's ability to manage its high debt levels and navigate regulatory challenges will be critical to its long-term success.
• The company's strategic initiatives, such as the formation of the Capital Solutions Group and the expansion of transaction banking and consumer platforms businesses, are expected to contribute to future revenue growth and profitability.

Analysis

• Revenue - Revenue growth is driven by increases in both interest income and non-interest income. - Interest income benefits from rising interest rates and growth in net loans. - Non-interest income remains relatively stable, contributing to overall revenue.
  • Profitability
    • The company exhibits strong profitability, as evidenced by a net profit margin significantly exceeding the industry average.
    • Effective expense management contributes to maintaining high profitability levels.
    • Return on equity is above the industry average, while return on assets and return on capital are below the industry average.
  • Liquidity
    • The current ratio is below the industry average, indicating a weaker liquidity position compared to peers.
    • The company's liquidity has been improving, as indicated by the increasing current ratio.
  • Solvency
    • The company relies heavily on debt financing, resulting in a high debt-to-equity ratio.
    • The high leverage increases the company's vulnerability to economic downturns and interest rate fluctuations.
    • The debt-to-equity ratio has been decreasing, indicating an improvement in solvency.
  • Operational Efficiency
    • The company appears to be efficiently utilizing its assets to generate revenue, as evidenced by the increasing net loans.
    • Management's emphasis on operating efficiency, as discussed in the earnings call, could contribute to improved asset utilization and profitability.
  • Cash Flow Analysis - Cash flows from operating activities have fluctuated significantly, reflecting the dynamics of the company's core business operations. - Investing activities are driven by purchase/sale of investments and proceeds from asset sales. - Financing activities are influenced by changes in deposits, capital stock, and debt.
  • Risk Factors
    • High financial leverage, as indicated by the high debt-to-equity ratio, poses a significant risk.
    • Fluctuations in interest rates and economic conditions could negatively impact the company's earnings and financial stability.
    • Regulatory uncertainty and legal exposures, as highlighted in the SEC filings, could also pose risks.
  • Future Outlook
    • Continued revenue growth and profitability are expected, driven by the company's strategic initiatives and favorable market conditions.
    • Management's focus on improving returns in Asset & Wealth Management and achieving operating efficiencies is expected to drive future growth.
    • The company's ability to manage its high debt levels and navigate regulatory challenges will be critical to its long-term success.

Benchmarks (as of 2025-02-25)

• Performance Comparison:

  • The Goldman Sachs Group, Inc. (GS) has generally outperformed the Financial Select Sector SPDR Fund (XLF) over the past three years. As of the latest data, GS has significantly higher returns over 1 year (61.4% vs 29.08%), 2 years (77.76% vs 47.95%), and 3 years (95.41% vs 39.79%). However, recent performance shows GS underperforming in the last week (-7.97% vs -2.36%) and month (-2.9% vs -0.88%), but outperforming YTD (6.95% vs 5.7%) and over 3 months (2.06% vs 0.03%) and 6 months (22.4% vs 15.24%).

• Risk and Return Analysis:

  • GS provides higher annualized returns compared to XLF over 1 year (61.4% vs 29.08%), 2 years (33.33% vs 21.63%), and 3 years (25.02% vs 11.81%).
  • GS is generally more volatile than XLF, as indicated by its higher annualized volatility. For example, in Q4 2024, GS reached a volatility of 44.25% while XLF was at 22.84%.
  • The maximum drawdown for GS was -32.84% on 2022-06-17, while for XLF it was -25.81% on 2022-10-12. This indicates that GS experienced larger peak-to-trough declines, suggesting a higher risk profile.

• Risk-Adjusted Performance:

  • The Sharpe ratios for both GS and XLF have fluctuated, with XLF generally showing better risk-adjusted returns. However, in Q1 2025, GS had a Sharpe ratio of 1.92, slightly higher than XLF's 1.84.
  • GS has a beta that fluctuates around 1, indicating that it generally moves in line with the market. In Q1 2025, the beta for GS was 1.26, while XLF's beta was 0.71, suggesting GS is more sensitive to market movements than XLF.

• Overall Assessment:

  • GS has demonstrated strong historical performance with higher returns compared to XLF, but it also exhibits higher volatility and larger drawdowns. While XLF generally offers better risk-adjusted returns, recent data shows GS with a slightly higher Sharpe ratio in Q1 2025. GS's higher beta suggests it is more sensitive to market movements.
  • Investors should consider their risk tolerance and investment horizon when choosing between GS and XLF. GS may be suitable for investors seeking higher returns and willing to accept higher risk, while XLF may be more appropriate for those prioritizing lower volatility and more stable risk-adjusted returns.

Peers Price History(as of 2025-02-25)

• Performance Comparison:

  • The Goldman Sachs Group, Inc. (GS) has shown mixed performance compared to its peers. Over the past year, GS has outperformed both JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS), with a return of 61.4% compared to 43.59% and 56.3%, respectively. However, over longer periods such as 2 and 3 years, GS has underperformed JPM but significantly outperformed MS. For example, over 2 years, GS returned 77.76% compared to JPM's 90.49% and MS's 44.08%.
  • The consistency of GS's performance varies. While it has shown strong returns in the past year, its performance over longer periods is less consistent compared to JPM.

• Risk and Return Analysis:

  • The annualized returns show that GS has provided higher returns than both JPM and MS over the past year. However, over 2 and 3 years, GS's annualized returns are lower than JPM's but higher than MS's. For instance, the 3-year annualized return for GS is 25.02%, compared to 25.42% for JPM and 16.75% for MS.
  • The annualized volatility data indicates that GS generally exhibits higher volatility than JPM but lower volatility than MS. For example, in Q1 2025, GS's volatility ranged from 19.15% to 29.37%, while JPM's ranged from 14.43% to 21.7% and MS's ranged from 22.56% to 31.02%.
  • The maximum drawdown for GS was -32.84% on 2022-06-17, which is less than JPM's -38.77% on 2022-10-11 but similar to MS's -32.38% on 2022-06-17. This suggests that GS's risk profile is moderate compared to its peers.

• Risk-Adjusted Performance:

  • The Sharpe Ratio analysis reveals that JPM generally has higher Sharpe Ratios compared to GS and MS, indicating better risk-adjusted returns. However, the Sharpe Ratios fluctuate over time, with periods where GS outperforms its peers.
  • The Beta value for GS generally fluctuates around 1, indicating that its sensitivity to market movements is similar to the market. In contrast, JPM's Beta is consistently below 1, suggesting lower sensitivity to market movements, while MS's Beta is often above 1, indicating higher sensitivity.

• Overall Assessment:

  • The Goldman Sachs Group, Inc. (GS) presents a mixed profile when compared to JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS). While GS has shown strong recent performance and competitive returns over a 3 year period, it exhibits higher volatility than JPM and a risk profile that is closely tied to market movements. JPM, on the other hand, offers more stable risk-adjusted returns with lower volatility and market sensitivity. MS tends to be more volatile and market-sensitive.
  • A significant trend is the fluctuating performance of GS relative to its peers, indicating that its strengths may lie in specific market conditions or investment strategies that are not consistently effective across all periods. The higher Beta and volatility suggest that GS may be more suitable for investors with a higher risk tolerance seeking potentially higher returns during favorable market conditions.

Peers Fundamentals(as of 2024-12-31)

1. Market Position and Size:

   • Goldman Sachs (GS) has a market capitalization of $191,876 million, which is significantly less than JPMorgan Chase (JPM) at $719,719 million, but is similar in size to Morgan Stanley (MS) at $209,027 million.
   • GS's revenue for the most recent quarter is $126,086 million, which is greater than Morgan Stanley's $105,531 million, but significantly less than JPMorgan Chase's $282,696 million. Its net income of $14,276 million is greater than Morgan Stanley's $13,390 million, but significantly less than JPMorgan Chase's $58,125 million.
   • GS is smaller than JPM in terms of market capitalization and revenue, but is similar in size to MS. This suggests that GS holds a significant, but not dominant, position within the investment banking industry.

2. Profitability and Efficiency:

   • GS's Net Profit Margin is 11.32%, which is less than JPM's 20.56% and MS's 12.69%. However, it is significantly greater than the industry average of 0.68%.
   • GS's Return on Average Assets is 0.86%, which is less than JPM's 1.47%, MS's 1.11%, and the industry average of 1.86%.
   • GS's Return on Average Total Equity is 11.95%, which is less than JPM's 17.28% and MS's 13.16%, but greater than the industry average of 9.41%.
   • GS is underperforming in Net Profit Margin and Return on Average Assets compared to JPM and MS, but is significantly outperforming the industry average in Net Profit Margin and Return on Average Total Equity.

3. Financial Health and Stability:

   • GS's Current Ratio is 1.48, which is greater than JPM's 1.03 and MS's 1.39, but less than the industry average of 3.76.
   • GS's Total Debt to Total Equity Ratio is 545.9, which is significantly greater than JPM's 228.38, MS's 364.22, and the industry average of 163.86.
   • GS's high Total Debt to Total Equity Ratio indicates a higher reliance on debt financing compared to its peers and the industry average. While its current ratio is better than its peers, it is still below the industry average.

4. Valuation and Market Perception:

   • GS's Enterprise Value To Sales is 5.43, which is greater than JPM's 5.09, but less than MS's 5.58, and greater than the industry average of 4.05.
   • GS's Price To Earnings is 15.17, which is greater than JPM's 13.03, but less than MS's 16.31, and less than the industry average of 90.93.
   • GS's Price to Book Ratio is 1.81, which is less than JPM's 2.22, MS's 2.2, and the industry average of 3.87.
   • GS's Price To Sales Ratio is 1.62, which is less than JPM's 2.63, MS's 1.94, and the industry average of 3.91.
   • GS's valuation metrics suggest that it may be undervalued compared to its peers and the industry average, particularly when considering its Price to Book and Price to Sales ratios.

5. Cash Flow and Capital Management:

   • GS does not have Net Operating Cash Flow, Total Capital Expenditure, or Free Cash Flow data provided.
   • JPM's Net Operating Cash Flow is $79,414 million, and MS's is -$10,126 million.
   • JPM's Total Capital Expenditure is $0 million, and MS's is $3,462 million.
   • JPM's Free Cash Flow is $79,414 million, and MS's is -$13,588 million.
   • Without cash flow data for GS, it is difficult to evaluate its cash flow generation strength relative to its size, peers, and industry norms.

6. Growth and Future Prospects:

   • GS shows higher growth in Net Income and Basic Earnings per Share in the most recent year compared to the peer group average.
   • GS's revenue growth has fluctuated significantly over the past five years, as evidenced by a high standard deviation of 25.03%. Net income and basic earnings per share also show high volatility.
   • GS's 3-year CAGR for Sales/Revenue is 25.43%, while its 5-year CAGR is 18.36%, indicating a recent acceleration in revenue growth. However, its 3-year CAGR for Net Income and Basic Earnings per Share are negative, while its 5-year CAGRs are positive, suggesting a longer-term positive trend offset by recent underperformance.
   • GS's revenue growth is strong compared to peers, but its earnings growth is more volatile.

7. Potential for Investment:

   • GS presents both opportunities and risks. Its high earnings per share and strong revenue growth are attractive, but its high debt levels and lower returns on assets and capital compared to peers are concerning. The potential undervaluation suggested by its lower Price to Book and Price to Sales ratios could represent an opportunity for investors, but the higher financial risk needs to be carefully considered.

8. Key Risks and Considerations:

   • GS's high debt levels pose a significant risk, as they could limit its financial flexibility and increase its vulnerability to economic downturns.
   • GS's lower returns on assets and capital compared to peers suggest that it may not be as efficient in generating profits from its investments.
   • The volatility in GS's earnings growth could make it a riskier investment compared to its more stable peers.

9. Overall Assessment:

   • GS's financial health presents a mixed picture. It exhibits strong earnings and revenue growth, but carries a high level of debt. Its profitability is above the industry average, but lags behind its peers. Its valuation metrics suggest potential undervaluation. Overall, GS appears to be a company with high earnings potential, but also higher financial risk due to its debt levels.