Investors might be surprised to learn that in the past five years, shares of Goldman Sachs (GS 2.86%) have soared 186%. Including the company's dividend, the total return achieved was 219%. That's a fantastic result that far outperforms the S&P 500's gain.

Right now, this bank stock trades at 7% off its peak price. Despite the small dip, there's clearly momentum brewing from the investment community, as optimism is high about the company's fundamental prospects as we look ahead.

Where will Goldman Sachs be in five years? Can it once again crush the broader market's return?

Smart strategic decisions

In 2016, Goldman Sachs launched Marcus, its foray into the consumer banking industry. This endeavor made sense at the time, as it would give the business a new revenue generator and expand its addressable market by targeting a customer cohort it hadn't in the past.

However, the venture ultimately failed due to a lack of financial success, and Goldman Sachs dismantled the division.

That strategic blunder, while obviously not good for management's track record or the company's financials on a temporary basis, could actually end up being a net positive. It might have refocused the leadership team's attention on areas that Goldman Sachs excels at, and that's at the high end of Wall Street activity, whether it's deal-making or serving ultra-high-net-worth clients.

Rhyming with this perspective, earlier this year, Goldman Sachs launched a Capital Solutions Group. It saw heightened interest from investors wanting to put money to work in private opportunities, including leveraged loans, real estate, or private equity. The company will structure deals to offer to clients.

Looking at the business five years from now, I think Goldman Sachs will double down on its current strengths. It's the top mergers and acquisitions (M&A) advisor and the No. 1 equities franchise. It's also a leader in fixed income, commodities, and currencies and a dominant asset management entity. Prioritizing these core areas will likely be the focus.

Notable catalysts

In 2024, Goldman Sachs reported a 16% jump in total revenue and a monster 68% rise in net income. This was clearly an unbelievable year for the Wall Street heavyweight. While investors shouldn't expect that type of growth to continue, some positive catalysts are set to work in the company's favor.

One trend mentioned in Goldman Sachs' Q4 2024 shareholder presentation was an improving economic environment. "The economy in the U.S. is quite constructive still," CEO David Solomon said on the Q4 2024 earnings call. The prospect of lower interest rates comes to mind. Other potential catalysts are deregulation and greater CEO confidence.

These factors surely provide the necessary ingredients for initial public offerings and M&A activity to pick up. For Goldman Sachs, this means more money-making opportunities.

The backdrop clearly looks favorable. However, investors should realize that things like macro forces, regulatory developments, and executive confidence are totally unpredictable. In other words, it's a good idea to still expect the unexpected.

Can the stock beat the market?

Goldman Sachs is a high-quality business, as evidenced by its strong fundamental performance and leadership positions atop many capital markets verticals. The stock's impressive gain in the past five years speaks to these positive attributes.

Investors looking to buy shares should think about what to expect throughout the rest of this decade. Can shares of Goldman Sachs beat the market over the next five years? I'm not confident that they can.

The stock's price-to-earnings (P/E) ratio is currently 15.3. This is historically expensive. It has climbed 48% since February 2020, indicating improving market sentiment.

Goldman Sachs should be on your watch list. But until the P/E multiple drops closer to 10, I don't view it as a smart buying opportunity.