Goldman Sachs Stock May Be Undervalued Amid Strong Earnings Growth
Goldman Sachs Group has enjoyed a strong three-year share price run, but investors are now questioning whether the current valuation is justified by the bank's returns on capital. The stock has risen about 208.7% over the past three years and is currently trading around $896.67 per share.
The key issue for investors is whether the underlying returns on capital are strong and durable enough to support this kind of repricing. Leadership succession planning, including reports that President and COO John Waldron may eventually take over as CEO with a focus on asset and wealth management, can influence how efficiently Goldman redeployed capital into fee-based and capital-light activities.
The Excess Returns model suggests that Goldman's current share price is conservative, given the bank's modeled excess profits. The model implies that the market is not fully reflecting these excess returns in the current quote, with an estimated intrinsic value meaningfully above the current share price.