NEW YORK - The S&P financial sub-index may be up 20% since Sept. 11, but many brokerage stocks haven't fully recovered. In fact, the six brokerages listed below are down an average 32% relative to their 52-week highs and seem cheap by other fundamental measures.
Example: Goldman Sachs (nyse: GS - news - people ), which traded as high as $120 a year ago. At a recent $84, the stock goes for 2.4 times book value versus a three-year average multiple of 3.5.
Based on earnings estimates gathered by Thomson Financial/IBES, Goldman Sachs is expected to earn $4.93 per share this year and $5.90 per share in 2003. Goldman sells for 17 times its 2002 forecast, 14 times the 2003 number and 20 times latest 12-month earnings per share.
Another plus: Despite talk of "synergies" between commercial and investment banking operations, larger financial conglomerates such as Citigroup (nyse: C - news - people ) and J.P. Morgan Chase (nyse: JPM - news - people ) aren't likely to steal away Goldman's lucrative work in equity underwriting and mergers and acquisitions. David Trone, brokerage analyst at Prudential Securities, points out that independent investment banks remain the top firms in the industry in these areas.
Full story at Forbes.com