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The Goldman Sachs Group, Inc. (GS) is an established financial institution providing a range of financial services to businesses, financial institutions, governments and individuals around the world. It operates through four segments: investment banking, global markets, asset management, and consumer and wealth management. JPMorgan Chase & Co. (JPM) is one of the world’s largest financial services companies. It operates in four segments: Consumer & Community Banking, Corporate & Investment Banking, Commercial Banking and Asset & Wealth Management.
Despite the persistent low interest rate environment, most financial sector stocks have rallied this year, with the reopening of economic activities dragging the non-interest-bearing components of their activities. Even though benchmark interest rates are kept close to zero for now, the Fed signaled two interest rate hikes as early as the end of 2023, a year earlier than expected, and raised its forecast to inflation at 3.4%. This is good news for the financial industry, as many financial stocks are thriving on rising interest rates.
According to Globe News Wire, the global financial services market is expected to grow at a CAGR of 9.9% to reach $ 22.5 trillion this year. Therefore, GS and JPM are expected to generate significant returns over the next few quarters.
GS’s stock price has gained 77.5% in the past year, while JPM’s has returned 61.8%. Additionally, GS’s 72.6% gains over the past nine months are significantly higher than JPM’s 48.3% returns. Additionally, in terms of performance over the past six months, GS is the big winner with 23.7% gains versus 11% for JPM.
But which of these two titles is the best buy now? Let’s find out.
Latest developments
On April 13, GS announced its intention to expand its presence in the UK by opening a new office in Birmingham. Richard Gnodde, CEO of the company, said: “Establishing a new office in Birmingham will diversify our presence in the UK and give us access to a broad and deep talent pool in the region. We see a tremendous opportunity to enhance our presence in the UK and continue to serve our global customers. “
JPM announced on June 29, 2021 that it has entered into an agreement to acquire OpenInvest, a leading financial technology company that helps finance professionals personalize and account for value-based investing. This should expand the company’s portfolio of products and services in the area of ​​sustainable investing.
Recent financial results
GS’s net revenue increased 102% year-on-year to $ 17.70 billion for its fiscal first quarter ended March 31, 2021. The company’s pre-tax profit increased 518% year-on-year to hit $ 8.30 billion, while its EPS stood at $ 18.60, up 498% year-over-year.
JPM’s net revenue increased 14% year-on-year to $ 33.12 billion for the first quarter ended March 31, 2021. Its net profit increased 399% year-on-year to 14.30 billions of dollars. Its EPS stood at $ 4.50, up 477% year-over-year.
Past and expected financial performance
GS revenue and EPS grew 14.7% and 56.1% CAGR, respectively, over the past three years. Analysts expect GS revenue to increase 23.2% for the quarter ended June 30, 2021 and 13.7% in its 2021 fiscal year. The company’s EPS is expected to increase by 1,737.7% for the quarter ended June 30, 2021 and 83.8% in its 2021 fiscal year. Its EPS is expected to grow at a rate of 19.3% per year over the next five years.
In comparison, JPM’s revenue and EPS have grown at CAGRs of 6.6% and 21.6%, respectively, over the past three years. The company’s revenue is expected to decline 0.9% for the quarter ended June 30, 2021 and 1.6% in its 2021 fiscal year. Its EPS is expected to increase 129.7% for the quarter ended June 30, 2021. June 30, 2021 and 48.6% in fiscal 2021. JPM’s EPS is expected to grow at a rate of 3% per year over the next five years.
Profitability
JPM’s last 12 months revenue is 2.30 times that generated by GS. JPM is also more profitable, with a net margin of 34.24% compared to 29.33% for GS.
However, the respective ROE and ROA of 15.64% and 1.26% of GS are higher than 14.97% and 1.19% of JPM.
Evaluation
In terms of non-GAAP PEG futures, JPM is currently trading at 1.13x, which is 140.4% higher than GS’s 0.47x. Additionally, JPM’s non-GAAP forward P / E ratio of 11.35x is 44.6% higher than GS’s 7.85x.
Thus, GS is the most affordable stock.
POWR odds
GS has an overall rating of B, which is equivalent to Buy in our proprietary POWR rating system. JPM, by comparison, has an overall rating of C, which translates to Neutral. POWR scores are calculated taking into account 118 different factors, each factor being weighted to an optimal degree.
GS and JPM both have B growth ratings, which matches their impressive revenue and EPS growth over the past few years.
Of the 24 stocks in the B-rated investment brokerage sector, GS is ranked No. 8. However, JPM is ranked # 3 out of 11 stocks in the C-listed money center banking sector.
Beyond what we have stated above, we also rated stocks for stability, dynamism, sentiment, value and quality. Click here to view all GS ratings. Get all JPM ratings here.
The winner
With the increase in financial transactions and the resumption of economic activities, the financial sector is expected to experience significant growth in the short term. While GS and JPM should win, we believe it is best to bet on GS now due to its better financial conditions, relatively lower valuation and impressive growth prospects.
Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. Check out all the top rated stocks in the investment brokerage industry here. Also click here for access to all the top rated stocks in the financial center banking industry.
GS stock was trading at $ 368.30 per share on Friday morning, up $ 9.36 (+ 2.61%). Year-to-date, GS has gained 40.68%, compared to a 16.67% increase for the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s a passionate interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach he takes while advising investors in his articles. Following…
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