Goldman Vs Evercore: Which Investment Banking Stock is a Smarter Bet?

Core Viewpoint - The investment banking landscape is evolving, with Evercore Inc. and The Goldman Sachs Group Inc. gaining investor attention due to their distinct service offerings in mergers and acquisitions, capital markets, and wealth management [1]. Investment Banking Sector Overview - The long-term outlook for the investment banking sector remains favorable, but near-term momentum has moderated due to market volatility and concerns over economic slowdown and inflation [2]. - The anticipated recovery in M&A activity is expected to occur in the latter half of 2025 [2]. Goldman Sachs Analysis - Goldman Sachs maintains a leadership position in global banking and markets, with a 24% year-over-year increase in IB revenues in 2024, driven by corporate debt and equity issuances [3]. - However, IB revenues declined by 8% year-over-year in Q1 2025 due to market uncertainty and a slowdown in M&A activities [3][4]. - Goldman is strategically exiting its non-core consumer banking business to focus on higher-margin areas like investment banking and trading, including ending its partnership with Apple [5][6]. - The company has divested several consumer finance businesses to enhance its focus on scalable core businesses [6]. Evercore Analysis - Evercore, while smaller, generates 95.9% of its revenues from Investment Banking and Equities, with a CAGR of 8.6% from 2017 to 2024 [7]. - The company is actively increasing its staff in the IB sector, employing 197 senior managing directors as of March 31, 2025, to support revenue growth [8]. Price Performance and Valuation - Over the past six months, Goldman shares fell by 0.1%, while Evercore shares dropped by 28.7%, against an industry growth of 0.8% [9]. - Goldman is trading at a 12-month forward P/E of 12.72X, higher than its five-year median of 10.17X, while Evercore trades at 18.06X, above its five-year median of 12.40X [11]. - Evercore's valuation is at a premium compared to the industry average of 13.73X, while Goldman is trading at a discount, making it a better choice for value investors [14]. Dividend Yield - Evercore has a dividend yield of 1.43%, while Goldman has a higher yield of 2.02%, both exceeding the industry average of 1.12% [14]. Earnings Estimates - The Zacks Consensus Estimate for Goldman suggests year-over-year revenue increases of 7.7% and 6% for Q2 and Q3 2025, respectively, with earnings growth of 13.9% and 20.9% [18]. - Conversely, Evercore's estimates indicate a revenue decline of 7.1% and 1.2% for the same quarters, with earnings declines of 22.7% and 3.4% [20]. Strategic Positioning - Despite near-term challenges, Goldman is well-positioned with an increased backlog and diversified revenue base, providing resilience that Evercore lacks during volatility [21]. - Goldman’s focus on high-return segments and divestitures is improving operational focus and profitability [22].