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The Goldman Sachs Group, Inc. (NYSE:GS) just released its latest second-quarter results and things are looking bullish. Statutory earnings performance was extremely strong, with revenue of US$13b beating expectations by 36% and earnings per share (EPS) of US$6.26, an impressive 56%ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Goldman Sachs Group's 20 analysts is for revenues of US$39.1b in 2020, which would reflect a credible 5.3% increase on its sales over the past 12 months. Statutory earnings per share are expected to reduce 6.3% to US$17.79 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$34.9b and earnings per share (EPS) of US$14.80 in 2020. So we can see there's been a pretty clear increase in sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades,the analysts have not made any major changes to their price target of US$242, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Goldman Sachs Group at US$355 per share, while the most bearish prices it at US$160. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Goldman Sachs Group's past performance and to peers in the same industry. It's clear from the latest estimates that Goldman Sachs Group's rate of growth is expected to accelerate meaningfully, with the forecast 5.3% revenue growth noticeably faster than its historical growth of 2.5%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.2% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Goldman Sachs Group is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Goldman Sachs Group's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Goldman Sachs Group going out to 2022, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 3 warning signs for Goldman Sachs Group you should be aware of, and 1 of them doesn't sit too well with us.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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