Fees, surcharges, fines, taxes, and other add-ons are a perpetual annoyance. However, for investors, companies that are able to charge extra fees, or increase their fees substantially over time, may be on to something.
That’s because companies that can charge more and still keep their customers are likely on track to perform well as a business. And that means investors should be able to see increasing profits and a higher share price over time.
With earnings season underway, a big way banks can earn big bucks is with increased fees. For investment bank Goldman Sachs (GS), those fees just increased by 21%. That’s thanks to rising market interest in mergers and acquisitions.
While the news was enough to send Goldman shares to an all-time high, the stock still trades at a reasonable 14 times forward earnings. Shares likely have further upside ahead with their current valuation and earnings beat, and with growing interest in dealmaking on Wall Street.
Action to take: Investors may like shares here, as they likely have more upside potential in the months ahead. Plus, at current prices, Goldman also pays a 2.3% dividend.
For traders, the September $525 calls, last trading for about $5.45, could see mid-double-digit returns from a continued trend higher over the rest of the summer.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.