Goldman Sach (GS) is a multinational investment banking firm, that engages in global investment banking, securities, investment management and other financial services to primarily institutional clients. Founded in 1820, it has over time grown to become the largest investment banking firm in the world. Many top executive of the firm have worked in and around the federal government, which has made the firm the most influential Wall Street institution in Washington, D.C.
Founded in 1820 by Marcus Goldman, and the firm made its name at the time by pioeering the use of commercial paper for entrepreneurs and joined the New York Stock Exchange in 1896. The firm's capital grew rapidly and it continued to expand its business. Goldman during the Great Depression turned away from trading and toward investment banking. It was Sideny Weinberg action that restored Goldman's tarnished reputation, and he was the mover of the IPO of Ford Motors in 1956. During this time the firm became a early innovator in risk arbitrage. It continued throughout the late 1950s through the 1980s to grow and expand its business. In 1990 the firm went public, which made the top partners in the firm multimillionaries over night.
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- GS 15-Year Financial Data
- The intrinsic value of GS
- Peter Lynch Chart of GS
During the financial crisis Goldman was able to secure over $4 billion in profits from shorting subprime mortgages, which allowed it initially to avoid large subprime writedowns, and achieve net profits, while most of its peers where reporting heavy losses that put most of them near collapse. In September 2008, Bershire Hathaway agreed to purchase $5 billion in Goldman preferred shares, with warrents to buy another $5 billion in common stock which were execisable for a five-year term. The firm also received $10 billion preferred stock investment from the US Treasury in October 2008, as part of the Trouble Asset Relief Program.
Government Capital Injected into Goldman:
- $589 billion from The Federal Reserves Primary Dealer Credit Facility.
- US Treasury Term Securities Lending Facility Loaned $193 billion.
- Goldman Borrowed a Total of $782 billion in hundreds of transcation in three months.
In 2009, the firm repayed the Treasury's investment with 23% interest in the form of $318 million in preferred dividend payments and $1.4 billion in warrant redemptions. On March 18, 2011, the firm got approval to buy back its preferred stock from Berkshire Hathaway by the Federal Reserve.
- Investment Bank - Accounts for 17% of total revenues
- Trading and Principal Investment - Accounts for 68% of revenues and profits
- Destress-Debt Investment - Invest in Destress Debt Globally
- Asset Management and Securities Services - Total Assets Under Supervision of $21 billion
- GS Capital Assets - Invested over $17 billion over 20 years
Major Private Equity Assets:
- The Ayco Company LP
- Hawker Beechcraft
- Cogentrix Energy
- American Casino & Entertainment Properties
- CHI James Restaurant Holdings
- USI Holdings Corporation
- East Coast Power LLC
- Queens Moat Houses
- Shineway Industrial Group
- Equity Inns. Inc
- Medfinders Inc
- Latin Force Group Inc
- Archon Hospitality Japan
- CMC Markets
|Total Current Assets||-||-||-||-|
|Total Current Liabilities||-||-||-||-|
|Total Liabilities & Shareholders' Equity||-||938555||923225||911332|
|Total Common Shares Outstanding||-||465.15||485.47||507.53|
|Total Preferred Shares Outstanding||-||0.18||0.12||0.17|
|Cost of Revenue, Total||6668||7501||7982||6806|
|Total Operating Expenses||29137||30457||30624||33075|
|Interest Income (Expense), Net Non-Operating||-||-||-||-|
|Gain (Loss) on Sale of Assets||-||-||-||-|
|Net Income Before Taxes||11737||11207||6169||12892|
|Provision for Income Taxes||3697||3732||1727||4538|
|Net Income After Taxes||8040||7475||4442||8354|
|Equity In Affiliates||-||-||-||-|
|U.S GAAP Adjustment||-||-||-||-|
|Net Income Before Extraordinary Items||8040||7475||4442||8354|
|Total Extraordinary Items||-||-||-||-|
|Total Adjustments to Net Income||-314||-183||-1932||-641|
|Income Available to Common Excluding Extraordinary Items||7726||7292||2510||7713|
|Diluted Net Income||7726||7292||2510||7713|
|Diluted Weighted Average Shares||499.6||516.1||556.9||585.3|
|Diluted EPS Excluding Extraordinary Items||15.46||14.13||4.51||13.18|
|DPS - Common Stock Primary Issue||2.05||1.77||1.4||1.4|
|Diluted Normalized EPS||16.78||14.01||5.08||15.22|
The firm produced net revenues of $34.2 billion and net earnings of $8 billion, an 8% increase from $7.5 billion in net earnings from 2012. Diluted earnings per share were $15.46 compared to $14.13 for 2012. Revenues that reflect the Client Services segment decreased 13% to $15 billion, and U.S. segment deceased 1% to $19 billion. It leverage ratio has fallen by more than one-half from 26 times at the end of 2007 to less than 12 times in 2013.
Goldman's excess liquidity as a percentage as a percentage of total assets grew from 5% at the end of 2007 to more than 20% at the end of 2013. Shareholder equity has grown from nearly $43 billion in 2008, to $78 billion at the end of 2013, which is a 83% increase the last six years. Capital ratios continued to improve despite returning $7.2 billion to shareholders through dividends and share buybacks.
Financial Assets and Liquidity
|Return on Assets||0.84%||0.78%||0.27%|
|Return on Equity||11.00%||10.70%||3.7%|
|Debt to Equity||2.26||2.41||2.58|
|Tier 1 Common||14.6%||14.5%||12.1%|
|Tier 1 Capital||16.7%||16.7%||13.8%|
Goldman Sach currently sells for 10x its earnings, 9.4x forward earnings, 6.1x its pretax earnings, 1x its book value, and sells for over 20x its free cash flow. Goldman isn't screaming undervalued but it is selling below its fair value. The firm should trade at more than 10x its earnings, which makes Goldman one of the cheapest large financial firms in the market today. Morgan Stanley, one of Goldman's peers, sells for 20x its earnings which is a highly unrealistic multiple for Goldman to trade to. Goldman to should trade for between 12x to 15x its earnings. If Goldman sold at 12x its normalized earnings then it would sell for $185.64 per share or 15x, then it would sell for $231.30. If Goldman sold at 10x its pretax earnings, it would sell for $259.20 per share which mean you can buy Goldman at 6x its pretax earnings and get a 16% pretax return on your potential investment. Goldman has a fair value range of $185 to $231 per share.