Intrinsic value of Goldman Sachs Group - GS

Previous Close

$231.69

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$231.69

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as GS.

We calculate the intrinsic value of GS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -3.92
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  37,850
  33,613
  35,233
  36,937
  38,730
  40,616
  42,599
  44,683
  46,875
  49,178
  51,599
  54,143
  56,816
  59,625
  62,576
  65,676
  68,933
  72,354
  75,947
  79,722
  83,686
  87,850
  92,224
  96,817
  101,640
  106,706
  112,026
  117,613
  123,480
  129,641
  136,111
Variable operating expenses, $m
 
  13,766
  13,571
  13,366
  13,149
  12,922
  12,683
  12,432
  12,168
  11,890
  11,599
  -6,525
  -6,847
  -7,185
  -7,541
  -7,915
  -8,307
  -8,719
  -9,152
  -9,607
  -10,085
  -10,587
  -11,114
  -11,667
  -12,249
  -12,859
  -13,500
  -14,174
  -14,881
  -15,623
  -16,403
Fixed operating expenses, $m
 
  7,316
  7,477
  7,642
  7,810
  7,982
  8,158
  8,337
  8,520
  8,708
  8,899
  9,095
  9,295
  9,500
  9,709
  9,922
  10,141
  10,364
  10,592
  10,825
  11,063
  11,306
  11,555
  11,809
  12,069
  12,335
  12,606
  12,883
  13,167
  13,456
  13,752
Total operating expenses, $m
  27,546
  21,082
  21,048
  21,008
  20,959
  20,904
  20,841
  20,769
  20,688
  20,598
  20,498
  2,570
  2,448
  2,315
  2,168
  2,007
  1,834
  1,645
  1,440
  1,218
  978
  719
  441
  142
  -180
  -524
  -894
  -1,291
  -1,714
  -2,167
  -2,651
Operating income, $m
  10,304
  12,530
  14,184
  15,930
  17,771
  19,712
  21,758
  23,914
  26,186
  28,580
  31,101
  51,573
  54,368
  57,310
  60,408
  63,668
  67,099
  70,709
  74,508
  78,504
  82,709
  87,131
  91,783
  96,675
  101,820
  107,231
  112,921
  118,903
  125,194
  131,808
  138,761
EBITDA, $m
  11,302
  142,670
  149,738
  157,180
  165,012
  173,255
  181,927
  191,050
  200,645
  210,736
  221,346
  232,502
  244,230
  256,559
  269,517
  283,137
  297,451
  312,494
  328,301
  344,911
  362,363
  380,701
  399,966
  420,207
  441,472
  463,811
  487,278
  511,931
  537,827
  565,029
  593,603
Interest expense (income), $m
  7,140
  37,555
  37,041
  37,382
  37,740
  38,118
  38,514
  38,932
  39,370
  39,831
  40,316
  40,825
  41,360
  41,923
  42,514
  43,135
  43,787
  44,472
  45,192
  45,948
  46,742
  47,576
  48,452
  49,372
  50,339
  51,353
  52,419
  53,538
  54,714
  55,948
  57,244
Earnings before tax, $m
  10,304
  -25,026
  -22,857
  -21,452
  -19,970
  -18,406
  -16,757
  -15,017
  -13,184
  -11,251
  -9,215
  10,747
  13,007
  15,388
  17,894
  20,534
  23,312
  26,237
  29,316
  32,557
  35,967
  39,555
  43,330
  47,303
  51,482
  55,877
  60,501
  65,365
  70,480
  75,860
  81,517
Tax expense, $m
  2,906
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2,902
  3,512
  4,155
  4,831
  5,544
  6,294
  7,084
  7,915
  8,790
  9,711
  10,680
  11,699
  12,772
  13,900
  15,087
  16,335
  17,649
  19,030
  20,482
  22,010
Net income, $m
  7,398
  -25,026
  -22,857
  -21,452
  -19,970
  -18,406
  -16,757
  -15,017
  -13,184
  -11,251
  -9,215
  7,846
  9,495
  11,233
  13,063
  14,990
  17,018
  19,153
  21,401
  23,766
  26,256
  28,875
  31,631
  34,531
  37,582
  40,791
  44,166
  47,716
  51,450
  55,378
  59,507

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  121,711
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  860,165
  145,509
  152,522
  159,901
  167,663
  175,826
  184,410
  193,434
  202,921
  212,892
  223,372
  234,385
  245,957
  258,116
  270,891
  284,311
  298,410
  313,220
  328,776
  345,116
  362,279
  380,305
  399,237
  419,120
  440,002
  461,931
  484,962
  509,147
  534,545
  561,217
  589,225
Adjusted assets (=assets-cash), $m
  738,454
  145,509
  152,522
  159,901
  167,663
  175,826
  184,410
  193,434
  202,921
  212,892
  223,372
  234,385
  245,957
  258,116
  270,891
  284,311
  298,410
  313,220
  328,776
  345,116
  362,279
  380,305
  399,237
  419,120
  440,002
  461,931
  484,962
  509,147
  534,545
  561,217
  589,225
Revenue / Adjusted assets
  0.051
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
Average production assets, $m
  11,473
  1,123,229
  1,177,369
  1,234,330
  1,294,247
  1,357,261
  1,423,521
  1,493,184
  1,566,415
  1,643,387
  1,724,283
  1,809,294
  1,898,624
  1,992,482
  2,091,094
  2,194,691
  2,303,522
  2,417,845
  2,537,930
  2,664,065
  2,796,549
  2,935,696
  3,081,838
  3,235,323
  3,396,516
  3,565,800
  3,743,578
  3,930,273
  4,126,330
  4,332,214
  4,548,417
Working capital, $m
  0
  -874,597
  -916,753
  -961,105
  -1,007,759
  -1,056,825
  -1,108,418
  -1,162,661
  -1,219,682
  -1,279,616
  -1,342,605
  -1,408,799
  -1,478,355
  -1,551,438
  -1,628,221
  -1,708,887
  -1,793,627
  -1,882,644
  -1,976,148
  -2,074,363
  -2,177,520
  -2,285,867
  -2,399,660
  -2,519,170
  -2,644,682
  -2,776,494
  -2,914,921
  -3,060,290
  -3,212,948
  -3,373,260
  -3,541,605
Total debt, $m
  515,432
  685,945
  692,257
  698,898
  705,884
  713,231
  720,956
  729,078
  737,616
  746,590
  756,022
  765,933
  776,348
  787,291
  798,789
  810,867
  823,556
  836,885
  850,886
  865,592
  881,038
  897,261
  914,300
  932,195
  950,988
  970,725
  991,453
  1,013,219
  1,036,078
  1,060,082
  1,085,289
Total liabilities, $m
  773,272
  130,958
  137,270
  143,911
  150,897
  158,244
  165,969
  174,091
  182,629
  191,603
  201,035
  210,946
  221,361
  232,304
  243,802
  255,880
  268,569
  281,898
  295,899
  310,605
  326,051
  342,274
  359,313
  377,208
  396,001
  415,738
  436,466
  458,232
  481,091
  505,095
  530,302
Total equity, $m
  86,893
  14,551
  15,252
  15,990
  16,766
  17,583
  18,441
  19,343
  20,292
  21,289
  22,337
  23,438
  24,596
  25,812
  27,089
  28,431
  29,841
  31,322
  32,878
  34,512
  36,228
  38,030
  39,924
  41,912
  44,000
  46,193
  48,496
  50,915
  53,455
  56,122
  58,922
Total liabilities and equity, $m
  860,165
  145,509
  152,522
  159,901
  167,663
  175,827
  184,410
  193,434
  202,921
  212,892
  223,372
  234,384
  245,957
  258,116
  270,891
  284,311
  298,410
  313,220
  328,777
  345,117
  362,279
  380,304
  399,237
  419,120
  440,001
  461,931
  484,962
  509,147
  534,546
  561,217
  589,224
Debt-to-equity ratio
  5.932
  47.140
  45.390
  43.710
  42.100
  40.560
  39.100
  37.690
  36.350
  35.070
  33.850
  32.680
  31.560
  30.500
  29.490
  28.520
  27.600
  26.720
  25.880
  25.080
  24.320
  23.590
  22.900
  22.240
  21.610
  21.010
  20.440
  19.900
  19.380
  18.890
  18.420
Adjusted equity ratio
  0.118
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,398
  -25,026
  -22,857
  -21,452
  -19,970
  -18,406
  -16,757
  -15,017
  -13,184
  -11,251
  -9,215
  7,846
  9,495
  11,233
  13,063
  14,990
  17,018
  19,153
  21,401
  23,766
  26,256
  28,875
  31,631
  34,531
  37,582
  40,791
  44,166
  47,716
  51,450
  55,378
  59,507
Depreciation, amort., depletion, $m
  998
  130,140
  135,554
  141,250
  147,242
  153,543
  160,169
  167,135
  174,458
  182,156
  190,245
  180,929
  189,862
  199,248
  209,109
  219,469
  230,352
  241,784
  253,793
  266,407
  279,655
  293,570
  308,184
  323,532
  339,652
  356,580
  374,358
  393,027
  412,633
  433,221
  454,842
Funds from operations, $m
  79
  105,114
  112,697
  119,798
  127,272
  135,137
  143,412
  152,118
  161,275
  170,904
  181,030
  188,775
  199,358
  210,481
  222,172
  234,459
  247,370
  260,938
  275,194
  290,173
  305,911
  322,445
  339,815
  358,063
  377,233
  397,371
  418,524
  440,744
  464,083
  488,599
  514,349
Change in working capital, $m
  -5,491
  -40,058
  -42,156
  -44,353
  -46,654
  -49,066
  -51,593
  -54,243
  -57,021
  -59,934
  -62,989
  -66,194
  -69,556
  -73,083
  -76,783
  -80,666
  -84,741
  -89,017
  -93,504
  -98,214
  -103,158
  -108,347
  -113,793
  -119,510
  -125,512
  -131,812
  -138,426
  -145,369
  -152,659
  -160,311
  -168,345
Cash from operations, $m
  5,570
  145,172
  154,853
  164,150
  173,926
  184,203
  195,006
  206,361
  218,295
  230,838
  244,019
  254,969
  268,913
  283,564
  298,955
  315,125
  332,111
  349,954
  368,698
  388,387
  409,068
  430,791
  453,608
  477,574
  502,745
  529,183
  556,950
  586,113
  616,742
  648,910
  682,694
Maintenance CAPEX, $m
  0
  -107,178
  -112,323
  -117,737
  -123,433
  -129,425
  -135,726
  -142,352
  -149,318
  -156,641
  -164,339
  -172,428
  -180,929
  -189,862
  -199,248
  -209,109
  -219,469
  -230,352
  -241,784
  -253,793
  -266,407
  -279,655
  -293,570
  -308,184
  -323,532
  -339,652
  -356,580
  -374,358
  -393,027
  -412,633
  -433,221
New CAPEX, $m
  -2,876
  -51,447
  -54,140
  -56,961
  -59,917
  -63,014
  -66,260
  -69,663
  -73,231
  -76,972
  -80,896
  -85,012
  -89,329
  -93,859
  -98,611
  -103,598
  -108,831
  -114,322
  -120,086
  -126,135
  -132,484
  -139,147
  -146,142
  -153,485
  -161,193
  -169,284
  -177,778
  -186,695
  -196,057
  -205,885
  -216,203
Cash from investing activities, $m
  9,270
  -158,625
  -166,463
  -174,698
  -183,350
  -192,439
  -201,986
  -212,015
  -222,549
  -233,613
  -245,235
  -257,440
  -270,258
  -283,721
  -297,859
  -312,707
  -328,300
  -344,674
  -361,870
  -379,928
  -398,891
  -418,802
  -439,712
  -461,669
  -484,725
  -508,936
  -534,358
  -561,053
  -589,084
  -618,518
  -649,424
Free cash flow, $m
  14,840
  -13,453
  -11,610
  -10,548
  -9,424
  -8,236
  -6,981
  -5,654
  -4,254
  -2,775
  -1,215
  -2,471
  -1,345
  -157
  1,096
  2,417
  3,811
  5,280
  6,828
  8,459
  10,178
  11,989
  13,896
  15,905
  18,020
  20,247
  22,592
  25,060
  27,658
  30,393
  33,270
Issuance/(repayment) of debt, $m
  18,761
  -9,526
  6,312
  6,641
  6,986
  7,347
  7,725
  8,122
  8,538
  8,974
  9,432
  9,912
  10,415
  10,943
  11,497
  12,079
  12,689
  13,329
  14,001
  14,706
  15,446
  16,223
  17,039
  17,895
  18,794
  19,737
  20,727
  21,767
  22,858
  24,004
  25,207
Issuance/(repurchase) of shares, $m
  -5,940
  41,457
  23,558
  22,190
  20,746
  19,222
  17,615
  15,920
  14,132
  12,248
  10,263
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  15,138
  31,931
  29,870
  28,831
  27,732
  26,569
  25,340
  24,042
  22,670
  21,222
  19,695
  9,912
  10,415
  10,943
  11,497
  12,079
  12,689
  13,329
  14,001
  14,706
  15,446
  16,223
  17,039
  17,895
  18,794
  19,737
  20,727
  21,767
  22,858
  24,004
  25,207
Total cash flow (excl. dividends), $m
  29,978
  18,478
  18,260
  18,283
  18,308
  18,333
  18,360
  18,387
  18,417
  18,447
  18,479
  7,441
  9,070
  10,786
  12,593
  14,496
  16,500
  18,609
  20,829
  23,165
  25,625
  28,212
  30,935
  33,800
  36,814
  39,984
  43,319
  46,827
  50,516
  54,397
  58,477
Retained Cash Flow (-), $m
  -165
  -41,457
  -23,558
  -22,190
  -20,746
  -19,222
  -17,615
  -15,920
  -14,132
  -12,248
  -10,263
  -1,101
  -1,157
  -1,216
  -1,277
  -1,342
  -1,410
  -1,481
  -1,556
  -1,634
  -1,716
  -1,803
  -1,893
  -1,988
  -2,088
  -2,193
  -2,303
  -2,419
  -2,540
  -2,667
  -2,801
Prev. year cash balance distribution, $m
 
  1,880
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  1,764
  1,849
  1,938
  2,032
  2,130
  2,234
  2,343
  2,458
  2,578
  2,705
  2,838
  2,978
  3,125
  3,279
  3,442
  3,612
  3,791
  3,979
  4,177
  4,385
  4,603
  4,832
  5,072
  5,325
  5,590
  5,869
  6,161
  6,469
  6,791
  7,130
Cash available for distribution, $m
 
  -21,099
  -5,298
  -3,907
  -2,438
  -889
  745
  2,468
  4,284
  6,199
  8,217
  6,339
  7,913
  9,570
  11,316
  13,154
  15,090
  17,128
  19,273
  21,531
  23,908
  26,410
  29,042
  31,811
  34,725
  37,791
  41,016
  44,408
  47,977
  51,730
  55,677
Discount rate, %
 
  14.90
  15.65
  16.43
  17.25
  18.11
  19.02
  19.97
  20.97
  22.01
  23.11
  24.27
  25.48
  26.76
  28.10
  29.50
  30.98
  32.52
  34.15
  35.86
  37.65
  39.53
  41.51
  43.59
  45.77
  48.05
  50.46
  52.98
  55.63
  58.41
  61.33
PV of cash for distribution, $m
 
  -18,363
  -3,961
  -2,475
  -1,290
  -387
  262
  690
  934
  1,034
  1,027
  581
  519
  439
  353
  272
  201
  143
  97
  64
  40
  24
  14
  8
  4
  2
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  19.1
  7.8
  3.4
  1.6
  0.8
  0.4
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1

The Goldman Sachs Group, Inc. is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. The Investment Banking segment consists of financial advisory and underwriting. The Institutional Client Services segment makes markets and facilitates client transactions in fixed income, equity, currency and commodity products. The investing and lending activities, which are typically longer-term, include its investing and relationship lending activities across various asset classes, primarily debt securities and loans, public and private equity securities, infrastructure and real estate. The Investment Management segment provides investment and wealth advisory services. As of December 2016, it had offices in over 30 countries.

FINANCIAL RATIOS  of  Goldman Sachs Group (GS)

Valuation Ratios
P/E Ratio 12.3
Price to Sales 2.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow 33.8
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 56.9%
Cap. Spend. - 3 Yr. Gr. Rate 32.4%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 307.4%
Total Debt to Equity 593.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 1.2%
Ret/ On T. Cap. - 3 Yr. Avg. 1.3%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 8.7%
Asset Turnover 0
Profitability Ratios
Gross Margin 72.2%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 48.7%
EBITDA Margin - 3 Yr. Avg. 45.3%
Operating Margin 27.2%
Oper. Margin - 3 Yr. Avg. 26.8%
Pre-Tax Margin 27.2%
Pre-Tax Margin - 3 Yr. Avg. 26.8%
Net Profit Margin 19.5%
Net Profit Margin - 3 Yr. Avg. 18.7%
Effective Tax Rate 28.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.1%
Payout Ratio 23.1%

GS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GS stock intrinsic value calculation we used $32073 million for the last fiscal year's total revenue generated by Goldman Sachs Group. The default revenue input number comes from 2016 income statement of Goldman Sachs Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GS stock valuation model: a) initial revenue growth rate of 4.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.9%, whose default value for GS is calculated based on our internal credit rating of Goldman Sachs Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Goldman Sachs Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GS stock the variable cost ratio is equal to 43.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7159 million in the base year in the intrinsic value calculation for GS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Goldman Sachs Group.

Corporate tax rate of 27% is the nominal tax rate for Goldman Sachs Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GS stock is equal to 5.5%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GS are equal to 3341.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Goldman Sachs Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GS is equal to -2602%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $0 million for Goldman Sachs Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 402 million for Goldman Sachs Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Goldman Sachs Group at the current share price and the inputted number of shares is $93.1 billion.

Articles on GS

Why Goldman Sachs stock is set to move much higher

Repatriation of money hoarded by American companies overseas will cause a wave of acquisitions. Goldman Sachs, as no other firm, is set to benefit from this.  [June 03, 2017]  read article

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Financial statements of GS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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