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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

Wednesday, January 30, 2002

Going For Brokers

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