Goldman Sachs (GS  ) reported record Q1 earnings and revenue that topped analysts' expectations by a significant margin. This beat was driven by strong results from the bank's trading and investment banking divisions. Shares were 4% higher following the result.

Inside the Numbers

Before diving into Goldman's report, it's worth noting the bank's string of impressive earnings report which was not interrupted by the pandemic, unlike most banks and companies. EPS has risen for the last four quarters from $0.53 per share in Q2 of 2020 to $18.60 per share in Q1 of 2021.

Notably, this was a major beat over expectations of $10.22 per share. Revenue also came in much stronger than expected at $17.7 billion vs expectations of $12.6 billion. This is more than a 100% increase from Q1 of 2020 and a 480% increase in terms of earnings.

Some of the factors accounting for Goldman's strong performance are the strength in financial markets, the robust IPO market, and the proliferation of special purpose acquisition companies (SPAC). As a result, investment banking revenue came in at $3.8 billion which topped expectations of $2.9 billion and was 73% higher than last year.

Trading revenue also came in strong with $3.9 billion from fixed income and $3.7 billion from equities. Financial advisory contributed $1.1 billion. Asset management revenue also reached a new record at $4.6 billion.

Stock Price Outlook

Goldman Sachs' strong results are in large part due to the Federal Reserve's liquidity programs which have been a boon for trading and investment banking. Liquidity and strength in financial markets have led to a strong IPO market and huge demand for SPACs. As a result, Goldman has been a major outperformed among all bank stocks.

Since the March 2020 low, the Financial Select SPDR Fund (XLF  ) is up just over 100%, while Goldman is up 170% over the same period. Many thought that shares may underperform due to rising rates and an improving economy which would favor consumer-focused banks. However, Goldman's results clearly show that its momentum continues to accelerate.

Following these results, Goldman's shares are now quite cheap on a value basis. Although shares have nearly tripled, earnings are up almost five-fold. This gives the stock a forward PE of 10 which is significantly cheaper than the S&P 500's (SPY  ) forward PE of around 23. Given this favorable valuation, shares remain a buy despite its gains over the last year.