• Investors may be wondering if Goldman Sachs Group at around US$1,048.58 is still offering value, or if most of the opportunity has already been priced in.
• The stock has returned 5.2% over the last 7 days, 13.5% over the last 30 days, 14.7% year to date and 78.7% over the past year, with a very large 3 year return and 204.9% over 5 years.
• Recent headlines have focused on Goldman Sachs Group's role in capital markets activity and its positioning within global financial services. This gives investors more information to weigh alongside these strong returns. This context matters because shifting expectations around deal flow, trading activity and balance sheet strength can all influence how the stock is priced.
• On Simply Wall St's 6 point valuation checklist, Goldman Sachs Group has a value score of 3. The sections ahead will compare different valuation approaches while highlighting an even deeper way to think about what the stock might be worth by the end of the article.

Approach 1: Goldman Sachs Group Excess Returns Analysis

The Excess Returns model looks at how efficiently Goldman Sachs Group turns shareholder equity into profits, above the return that investors typically require. Instead of focusing on cash flows, it compares the company’s return on equity to its cost of equity and capitalizes that surplus.

For Goldman Sachs Group, book value is $356.27 per share and the average return on equity used in the model is 16.95%. This is compared with a cost of equity of $36.23 per share. The result is an excess return of $29.81 per share, supported by a stable EPS estimate of $66.03 per share, based on weighted future return on equity estimates from 15 analysts. The model also uses a stable book value of $389.60 per share, taken from weighted future book value estimates from 12 analysts.

Using these inputs, the Excess Returns model calculates an intrinsic value of about $907.22 per share. When this is compared with the current share price of around $1,048.58, the stock appears to be about 15.6% more expensive than the model’s estimate.

Result: OVERVALUED

Our Excess Returns analysis suggests Goldman Sachs Group may be overvalued by 15.6%. Discover 47 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Goldman Sachs Group Price vs Earnings

For a profitable company like Goldman Sachs Group, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. In general, higher growth expectations or lower perceived risk can justify a higher P/E, while slower expected growth or higher risk usually points to a lower, more cautious multiple.

Goldman Sachs Group currently trades on a P/E of 18.84x. This sits below the Capital Markets industry average P/E of 39.53x and below the peer group average of 29.32x. Simply Wall St also calculates a proprietary “Fair Ratio” of 19.38x for the stock, which represents the P/E level that might be expected given its earnings growth profile, industry, profit margins, market cap and specific risks.

The Fair Ratio aims to be more tailored than a simple comparison with peers or the broad industry, because it adjusts for company specific factors such as growth, risk, profitability, sector and size. Comparing the current P/E of 18.84x with the Fair Ratio of 19.38x suggests the stock is somewhat cheaper than this modelled level.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Goldman Sachs Group Narrative

Earlier it was mentioned that there is an even better way to think about valuation, and that is through Narratives. These let you attach a clear story about Goldman Sachs Group to the numbers you believe in, such as fair value, future revenue, earnings and margins, then see how that story translates into a forecast and a fair value that can be compared with the current price.

On Simply Wall St's Community page, Narratives are an accessible tool used by millions of investors. They can help you decide whether to buy or sell by setting out your assumptions and instantly showing how they compare with the market price. Narratives also refresh automatically as new information like news or earnings is added to the platform.

For Goldman Sachs Group, one investor might align with a more cautious Narrative that uses a fair value of US$743.84, while another might back a more optimistic view closer to US$900. Narratives make these different perspectives transparent so you can see which story about growth, profitability and valuation most closely matches your own view before making any decision.

Do you think there's more to the story for Goldman Sachs Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.