Intrinsic value of Goldman Sachs Group - GS

Previous Close

$244.73

  Intrinsic Value

$435.89

stock screener

  Rating & Target

str. buy

+78%

  Value-price divergence*

-117%

Previous close

$244.73

 
Intrinsic value

$435.89

 
Up/down potential

+78%

 
Rating

str. buy

 
Value-price divergence*

-117%

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

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 94.5

 

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
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  37,850
  41,029
  44,336
  47,774
  51,347
  55,060
  58,918
  62,929
  67,099
  71,436
  75,948
  80,646
  85,539
  90,637
  95,952
  101,496
  107,282
  113,322
  119,630
  126,222
  133,113
  140,319
  147,857
  155,745
  164,001
  172,646
  181,700
  191,184
  201,121
  211,535
  222,451
Variable operating expenses, $m
 
  31,849
  34,387
  37,024
  39,766
  42,615
  45,575
  48,653
  51,852
  55,180
  58,643
  61,881
  65,635
  69,547
  73,626
  77,880
  82,319
  86,953
  91,794
  96,852
  102,140
  107,669
  113,453
  119,505
  125,841
  132,474
  139,421
  146,698
  154,323
  162,314
  170,690
Fixed operating expenses, $m
 
  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 operating expenses, $m
  27,546
  31,849
  34,387
  37,024
  39,766
  42,615
  45,575
  48,653
  51,852
  55,180
  58,643
  61,881
  65,635
  69,547
  73,626
  77,880
  82,319
  86,953
  91,794
  96,852
  102,140
  107,669
  113,453
  119,505
  125,841
  132,474
  139,421
  146,698
  154,323
  162,314
  170,690
Operating income, $m
  10,304
  9,180
  9,950
  10,750
  11,581
  12,445
  13,343
  14,276
  15,246
  16,255
  17,305
  18,765
  19,904
  21,090
  22,327
  23,617
  24,963
  26,368
  27,836
  29,370
  30,973
  32,650
  34,404
  36,240
  38,161
  40,172
  42,279
  44,486
  46,798
  49,221
  51,761
EBITDA, $m
  11,302
  10,365
  11,200
  12,069
  12,971
  13,909
  14,884
  15,897
  16,950
  18,046
  19,186
  20,373
  21,609
  22,897
  24,239
  25,640
  27,101
  28,627
  30,221
  31,886
  33,627
  35,447
  37,352
  39,344
  41,430
  43,614
  45,901
  48,297
  50,807
  53,438
  56,195
Interest expense (income), $m
  7,140
  13,780
  15,810
  17,812
  19,893
  22,056
  24,303
  26,638
  29,066
  31,590
  34,215
  36,947
  39,790
  42,752
  45,838
  49,055
  52,411
  55,912
  59,568
  63,387
  67,377
  71,548
  75,910
  80,472
  85,247
  90,245
  95,477
  100,957
  106,698
  112,713
  119,017
Earnings before tax, $m
  10,304
  -4,600
  -5,861
  -7,062
  -8,312
  -9,611
  -10,960
  -12,362
  -13,820
  -15,335
  -16,910
  -18,181
  -19,887
  -21,662
  -23,511
  -25,438
  -27,448
  -29,544
  -31,732
  -34,017
  -36,404
  -38,898
  -41,506
  -44,233
  -47,086
  -50,072
  -53,198
  -56,472
  -59,900
  -63,492
  -67,256
Tax expense, $m
  2,906
  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
Net income, $m
  7,398
  -4,600
  -5,861
  -7,062
  -8,312
  -9,611
  -10,960
  -12,362
  -13,820
  -15,335
  -16,910
  -18,181
  -19,887
  -21,662
  -23,511
  -25,438
  -27,448
  -29,544
  -31,732
  -34,017
  -36,404
  -38,898
  -41,506
  -44,233
  -47,086
  -50,072
  -53,198
  -56,472
  -59,900
  -63,492
  -67,256

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
  804,498
  869,341
  936,749
  1,006,805
  1,079,604
  1,155,260
  1,233,897
  1,315,657
  1,400,696
  1,489,181
  1,581,295
  1,677,231
  1,777,199
  1,881,418
  1,990,122
  2,103,560
  2,221,991
  2,345,690
  2,474,945
  2,610,059
  2,751,351
  2,899,154
  3,053,819
  3,215,712
  3,385,219
  3,562,743
  3,748,707
  3,943,554
  4,147,748
  4,361,778
Adjusted assets (=assets-cash), $m
  738,454
  804,498
  869,341
  936,749
  1,006,805
  1,079,604
  1,155,260
  1,233,897
  1,315,657
  1,400,696
  1,489,181
  1,581,295
  1,677,231
  1,777,199
  1,881,418
  1,990,122
  2,103,560
  2,221,991
  2,345,690
  2,474,945
  2,610,059
  2,751,351
  2,899,154
  3,053,819
  3,215,712
  3,385,219
  3,562,743
  3,748,707
  3,943,554
  4,147,748
  4,361,778
Revenue / Adjusted assets
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
Average production assets, $m
  11,473
  12,432
  13,434
  14,476
  15,558
  16,683
  17,852
  19,067
  20,331
  21,645
  23,012
  24,436
  25,918
  27,463
  29,074
  30,753
  32,506
  34,336
  36,248
  38,245
  40,333
  42,517
  44,801
  47,191
  49,692
  52,312
  55,055
  57,929
  60,940
  64,095
  67,403
Working capital, $m
  0
  20,515
  22,168
  23,887
  25,674
  27,530
  29,459
  31,464
  33,549
  35,718
  37,974
  40,323
  42,769
  45,319
  47,976
  50,748
  53,641
  56,661
  59,815
  63,111
  66,557
  70,159
  73,928
  77,872
  82,001
  86,323
  90,850
  95,592
  100,561
  105,768
  111,225
Total debt, $m
  515,432
  451,727
  508,918
  568,373
  630,162
  694,371
  761,099
  830,457
  902,570
  977,574
  1,055,618
  1,136,862
  1,221,478
  1,309,649
  1,401,570
  1,497,448
  1,597,500
  1,701,956
  1,811,058
  1,925,061
  2,044,232
  2,168,852
  2,299,214
  2,435,628
  2,578,418
  2,727,923
  2,884,499
  3,048,519
  3,220,374
  3,400,474
  3,589,248
Total liabilities, $m
  773,272
  709,567
  766,758
  826,213
  888,002
  952,211
  1,018,939
  1,088,297
  1,160,410
  1,235,414
  1,313,458
  1,394,702
  1,479,318
  1,567,489
  1,659,410
  1,755,288
  1,855,340
  1,959,796
  2,068,898
  2,182,901
  2,302,072
  2,426,692
  2,557,054
  2,693,468
  2,836,258
  2,985,763
  3,142,339
  3,306,359
  3,478,214
  3,658,314
  3,847,088
Total equity, $m
  86,893
  94,931
  102,582
  110,536
  118,803
  127,393
  136,321
  145,600
  155,248
  165,282
  175,723
  186,593
  197,913
  209,709
  222,007
  234,834
  248,220
  262,195
  276,791
  292,043
  307,987
  324,659
  342,100
  360,351
  379,454
  399,456
  420,404
  442,347
  465,339
  489,434
  514,690
Total liabilities and equity, $m
  860,165
  804,498
  869,340
  936,749
  1,006,805
  1,079,604
  1,155,260
  1,233,897
  1,315,658
  1,400,696
  1,489,181
  1,581,295
  1,677,231
  1,777,198
  1,881,417
  1,990,122
  2,103,560
  2,221,991
  2,345,689
  2,474,944
  2,610,059
  2,751,351
  2,899,154
  3,053,819
  3,215,712
  3,385,219
  3,562,743
  3,748,706
  3,943,553
  4,147,748
  4,361,778
Debt-to-equity ratio
  5.932
  4.760
  4.960
  5.140
  5.300
  5.450
  5.580
  5.700
  5.810
  5.910
  6.010
  6.090
  6.170
  6.250
  6.310
  6.380
  6.440
  6.490
  6.540
  6.590
  6.640
  6.680
  6.720
  6.760
  6.800
  6.830
  6.860
  6.890
  6.920
  6.950
  6.970
Adjusted equity ratio
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,398
  -4,600
  -5,861
  -7,062
  -8,312
  -9,611
  -10,960
  -12,362
  -13,820
  -15,335
  -16,910
  -18,181
  -19,887
  -21,662
  -23,511
  -25,438
  -27,448
  -29,544
  -31,732
  -34,017
  -36,404
  -38,898
  -41,506
  -44,233
  -47,086
  -50,072
  -53,198
  -56,472
  -59,900
  -63,492
  -67,256
Depreciation, amort., depletion, $m
  998
  1,184
  1,250
  1,319
  1,390
  1,464
  1,541
  1,621
  1,704
  1,791
  1,881
  1,608
  1,705
  1,807
  1,913
  2,023
  2,139
  2,259
  2,385
  2,516
  2,654
  2,797
  2,947
  3,105
  3,269
  3,442
  3,622
  3,811
  4,009
  4,217
  4,434
Funds from operations, $m
  79
  -3,415
  -4,610
  -5,743
  -6,922
  -8,146
  -9,419
  -10,741
  -12,116
  -13,544
  -15,029
  -16,574
  -18,181
  -19,855
  -21,598
  -23,415
  -25,309
  -27,285
  -29,348
  -31,501
  -33,750
  -36,101
  -38,558
  -41,128
  -43,817
  -46,631
  -49,576
  -52,661
  -55,891
  -59,275
  -62,821
Change in working capital, $m
  -5,491
  1,590
  1,653
  1,719
  1,786
  1,856
  1,929
  2,005
  2,085
  2,168
  2,256
  2,349
  2,446
  2,549
  2,658
  2,772
  2,893
  3,020
  3,154
  3,296
  3,445
  3,603
  3,769
  3,944
  4,128
  4,322
  4,527
  4,742
  4,969
  5,207
  5,458
Cash from operations, $m
  5,570
  -5,005
  -6,264
  -7,462
  -8,708
  -10,003
  -11,348
  -12,747
  -14,200
  -15,712
  -17,285
  -18,923
  -20,628
  -22,404
  -24,256
  -26,187
  -28,202
  -30,305
  -32,502
  -34,797
  -37,196
  -39,704
  -42,327
  -45,072
  -47,945
  -50,953
  -54,103
  -57,403
  -60,860
  -64,482
  -68,279
Maintenance CAPEX, $m
  0
  -755
  -818
  -884
  -952
  -1,024
  -1,098
  -1,174
  -1,254
  -1,338
  -1,424
  -1,514
  -1,608
  -1,705
  -1,807
  -1,913
  -2,023
  -2,139
  -2,259
  -2,385
  -2,516
  -2,654
  -2,797
  -2,947
  -3,105
  -3,269
  -3,442
  -3,622
  -3,811
  -4,009
  -4,217
New CAPEX, $m
  -2,876
  -959
  -1,002
  -1,042
  -1,083
  -1,125
  -1,169
  -1,215
  -1,263
  -1,314
  -1,367
  -1,423
  -1,483
  -1,545
  -1,610
  -1,680
  -1,753
  -1,830
  -1,912
  -1,997
  -2,088
  -2,183
  -2,284
  -2,390
  -2,502
  -2,619
  -2,743
  -2,874
  -3,011
  -3,155
  -3,307
Cash from investing activities, $m
  9,270
  -1,714
  -1,820
  -1,926
  -2,035
  -2,149
  -2,267
  -2,389
  -2,517
  -2,652
  -2,791
  -2,937
  -3,091
  -3,250
  -3,417
  -3,593
  -3,776
  -3,969
  -4,171
  -4,382
  -4,604
  -4,837
  -5,081
  -5,337
  -5,607
  -5,888
  -6,185
  -6,496
  -6,822
  -7,164
  -7,524
Free cash flow, $m
  14,840
  -6,719
  -8,084
  -9,388
  -10,743
  -12,151
  -13,615
  -15,136
  -16,718
  -18,364
  -20,077
  -21,860
  -23,718
  -25,654
  -27,673
  -29,780
  -31,978
  -34,274
  -36,672
  -39,179
  -41,800
  -44,541
  -47,408
  -50,410
  -53,552
  -56,842
  -60,288
  -63,898
  -67,682
  -71,647
  -75,803
Issuance/(repayment) of debt, $m
  18,761
  58,006
  57,191
  59,454
  61,789
  64,209
  66,728
  69,358
  72,113
  75,004
  78,044
  81,244
  84,616
  88,171
  91,921
  95,878
  100,052
  104,456
  109,102
  114,003
  119,171
  124,619
  130,362
  136,414
  142,790
  149,505
  156,576
  164,020
  171,855
  180,100
  188,774
Issuance/(repurchase) of shares, $m
  -5,940
  12,638
  13,512
  15,017
  16,579
  18,201
  19,887
  21,642
  23,467
  25,369
  27,351
  29,051
  31,207
  33,458
  35,809
  38,265
  40,833
  43,519
  46,329
  49,269
  52,347
  55,570
  58,946
  62,483
  66,190
  70,074
  74,146
  78,415
  82,892
  87,587
  92,511
Cash from financing (excl. dividends), $m  
  15,138
  70,644
  70,703
  74,471
  78,368
  82,410
  86,615
  91,000
  95,580
  100,373
  105,395
  110,295
  115,823
  121,629
  127,730
  134,143
  140,885
  147,975
  155,431
  163,272
  171,518
  180,189
  189,308
  198,897
  208,980
  219,579
  230,722
  242,435
  254,747
  267,687
  281,285
Total cash flow (excl. dividends), $m
  29,978
  63,925
  62,620
  65,083
  67,625
  70,259
  73,000
  75,863
  78,862
  82,009
  85,318
  88,435
  92,105
  95,975
  100,057
  104,363
  108,907
  113,701
  118,759
  124,093
  129,718
  135,649
  141,901
  148,488
  155,428
  162,737
  170,434
  178,537
  187,065
  196,040
  205,482
Retained Cash Flow (-), $m
  -165
  -12,638
  -13,512
  -15,017
  -16,579
  -18,201
  -19,887
  -21,642
  -23,467
  -25,369
  -27,351
  -29,051
  -31,207
  -33,458
  -35,809
  -38,265
  -40,833
  -43,519
  -46,329
  -49,269
  -52,347
  -55,570
  -58,946
  -62,483
  -66,190
  -70,074
  -74,146
  -78,415
  -82,892
  -87,587
  -92,511
Prev. year cash balance distribution, $m
 
  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
Cash flow adjustment, $m
 
  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
Cash available for distribution, $m
 
  51,287
  49,108
  50,067
  51,046
  52,058
  53,113
  54,222
  55,394
  56,640
  57,967
  59,384
  60,898
  62,517
  64,248
  66,098
  68,074
  70,182
  72,430
  74,824
  77,371
  80,079
  82,954
  86,005
  89,238
  92,663
  96,288
  100,122
  104,173
  108,453
  112,971
Discount rate, %
 
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
 
  46,122
  39,317
  35,306
  31,346
  27,500
  23,826
  20,373
  17,180
  14,276
  11,680
  9,400
  7,434
  5,772
  4,394
  3,277
  2,390
  1,704
  1,185
  803
  530
  339
  211
  127
  74
  42
  23
  12
  6
  3
  1
Current shareholders' claim on cash, %
  100
  88.2
  78.0
  68.7
  60.4
  52.9
  46.3
  40.4
  35.2
  30.6
  26.5
  23.0
  20.0
  17.3
  14.9
  12.9
  11.1
  9.6
  8.2
  7.1
  6.1
  5.2
  4.5
  3.8
  3.3
  2.8
  2.4
  2.0
  1.7
  1.5
  1.3

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 13
Price to Sales 2.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow 35.7
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 $37850 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 8.4% 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 11.2%, 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 77.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 3.5% 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 0%.

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 30.3%.

Life of production assets of 15.2 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 50%. 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 - $86893 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 385.985 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 $94.5 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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