Goldmans Sachs (GSC, Financial) trades on a PE of 10.98 despite recently reporting very strong third quarter results that included a 25% increase in revenues to $8.39 billion and a 59% increase in EPS to $4.57. The increase smashed forecasts of $3.21 per share and resulted from improvements across the board as Investment Banking revenues rose 26%, Institutional Client Services jumped 32%, Investing & Lending was 15% higher and Investment Management was 20% higher.
Some commentators are concerned about weak future growth, but forecasters should note that Goldman has beaten forecasts in the last four quarters by 9%, 16.5%, 34.4% and most recently 42.4%. As the only remaining pure play Investment Bank, it arguably has less competition than a decade ago and ranks first globally for announced and completed mergers and acquisitions this year. With a 36% increase in M&A activity reported in Q3 pent up demand is finally appearing as the economy continues to improve and the prospect of rising interest rates increases.
The author is a blogger for SurgingEarnings.com
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Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.
