Goldman Shows Revenue Growth & Cost Control; Should You Hold?

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On Nov 19, 2014, we issued an updated research report on The Goldman Sachs Group, Inc. GS. Shares of this New York-based investment manager have recorded a year-to-date return of 7.8%. Further, Goldman has outpaced the Zacks Consensus Estimate in the last four quarters, with an average beat of 25.95%.

We believe this growth story has been aided by the company's continued focus on expense management and revenue growth apart from several other positives including a strong capital position, steady capital deployment activities and business diversification.

Organic growth remains a key strength at Goldman, as reflected in its revenue growth. Revenues jumped 5.6% year over year in the first nine months of 2014, after reflecting a CAGR of 9% over the last three years (2011–2013). We believe the company is well positioned to maintain this trend going forward.

Though Goldman's operating expenses increased slightly year over year for the nine months ended Sep 2014, continuation of expense management will aid top-line expansion in the coming quarters. Reflecting the company's successful expense reduction initiatives, total operating expenses declined 14.5% in 2013 as compared with the level of 2010 (before the launch of comprehensive expense initiative). This resulted in a 140 basis points rise in pretax margin in 2013, the highest level in the last four years.

In the first nine months of 2014, the company paid $779 million as common stock dividends, along with the repurchase of common stock worth $4.2 billion. Such a shareholder-friendly approach is expected to act as a catalyst for the stock.

Analysts' bullish stance on the stock was reflected in the estimate revisions over the past 60 days. For 2014, the Zacks Consensus Estimate advanced 5.6% to $17.64 per share. It moved up 1.7% to $17.60 per share for 2015. Hence, Goldman currently carries a Zacks Rank #2 (Buy).

Key Picks from the Sector

Other stocks in the same sector worth considering include FXCM Inc. FXCM and Piper Jaffray Companies PJC with a Zacks Rank #1 (Strong Buy), while Evercore Partners Inc. EVR carries a Zacks Rank #2 (Buy).


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GOLDMAN SACHS GS: Free Stock Analysis Report

FXCM INC-A FXCM: Free Stock Analysis Report

PIPER JAFFRAY PJC: Free Stock Analysis Report

EVERCORE PARTNR EVR: Free Stock Analysis Report

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