GS Stock Report

2-Year Price History

View Larger GS Chart

Ockham's Rating

GS Revenue

As a value investing shop, we are interested in seeing how GS's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.52x and the low end of the range at 0.82x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for GS of 1.39x is well above its historical average. This means that GS looks relatively expensive compared to its historical Price to Sales average, and thus it is more difficult to believe that there is significant price appreciation potential. In order for the stock to become more attractive, we would like to see a decline in the Price to Sales ratio of 18% just to return GS to its historical average.

GS Cash Earnings

Looking at GS specifically in their Cash Earnings capabilities, Ockham views GS as significantly above its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from GS. For example, GS's Cash Earnings ratio per share has fluctuated between 8.07 and 19.22 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where GS is with respect to prior business periods.

So what does this tell us about GS in particular? Basically, we would value the current level of Cash Earnings per share (which is at 32.32) as significantly overvalued. Just by looking at the last closing price of GS, which was $143.49, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded GS with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that GS may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

GS Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for GS to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for GS is $1.40 producing a current dividend yield of 0.98%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from GS against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from GS over previous years was 2.95% while the lowest dividend yield was 0.36%. It is never a good sign for a company to pay significantly lower dividends, in this case 40.79% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.