What is GS's Intrinsic value?

Goldman Sachs Group Inc (GS) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, Goldman Sachs Group Inc's estimated intrinsic value ranges from $515.35 to $925.28 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $925.28 +50.7%
Dividend Discount Model (Stable) $515.35 -16.1%

Is Goldman Sachs Group Inc (GS) undervalued or overvalued?

With the current market price at $614.00, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Goldman Sachs Group Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.34 1.68
Cost of equity 10.1% 14.3%
Cost of debt 4.2% 23.9%
Tax rate 20.4% 21.4%
Debt/Equity ratio 5.86 5.86
After-tax WACC 4.3% 18.1%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 30.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 12.2%
  • Long-term growth rate: 3.5%
  • Fair value: $925.28 (50.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 14.3% (Low) to 10.1% (High)
  • Long-term growth rate: 3.0% (Low) to 4.1% (High)
  • Fair value range: $302 to $729
  • Selected fair value: $515.35 (-16.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $188400M
Enterprise Value $1156400M
Trailing P/E 12.66
Forward P/E 10.81
Trailing EV/EBITDA 23.85
Current Dividend Yield 238.27%
Dividend Growth Rate (5Y) 17.79%
Debt-to-Equity Ratio 5.86

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $185.06
Dividend Discount Model (Stable) 43% $77.30
Weighted Average 100% $749.59

Investment Conclusion

Based on our comprehensive valuation analysis, Goldman Sachs Group Inc's weighted average intrinsic value is $749.59, which is approximately 22.1% above the current market price of $614.00.

Key investment considerations:

  • Strong projected earnings growth (11% to 25% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 17.79%

Given these factors, we believe Goldman Sachs Group Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.