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Morgan Stanley (MS) Down 15% YTD: Should You Buy on the Dip?
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Markets have been extremely volatile since the beginning of 2022, with the ongoing Russia-Ukraine conflict adding fuel to the fire. This has also raised concerns regarding global economic growth. Amid such a bleak scenario, choosing stocks that will generate solid returns over time can be tricky.
All the major indexes are in red and witnessing major corrections. Finance sector companies are not untouched, in spite of gradual improvement in the operating backdrop. One such stock — Morgan Stanley (MS - Free Report) — is down 15% so far this year. The stock is even trading below the industry and the S&P 500 index, down 11.5% and 9.2%, respectively, in the same time frame.
At $83.45 per share, Morgan Stanley is currently trading at a price/tangible book value of 2.02X, way below the industry average of 3.17X. The company’s beaten-down stock price and cheap valuation might be a good entry point for investors.
Year to Date Price Performance
Image Source: Zacks Investment Research
Let’s check Morgan Stanley’s fundamentals before taking any investment decision.
Over the past several years, MS has been undertaking measures to become less dependent on capital markets and lower earnings volatility. These efforts have started bearing fruits as the company is focusing on the Wealth Management and Investment Management segments.
Morgan Stanley’s strategic expansion efforts, including the buyouts of Eaton Vance, E*Trade Financial and Shareworks, are steps in this direction. Both segments’ aggregate contribution to net revenues has jumped from 26% in 2010 to 51% in 2021.
The company’s partnership with MUFG is expected to continue supporting profitability. As China has opened up its financial markets for foreign firms since 2018, Morgan Stanley is taking full advantage of this. The company either has approval for 100% ownership of its local joint ventures (JVs) or obtained a majority stake in the JVs.
With the Federal Reserve signaling few interest rate hikes this year, the company is well poised to benefit from the same.
Performance of the company’s Institutional Securities segment, which depends on the performance of the capital markets, is a concern,. While overall segment revenues rose last year, the future performance of the segment remains uncertain as it depends on market developments and client volumes.
Morgan Stanley witnessed earnings growth of 20.2% in the past three to five years. While earnings are expected to decline 6.3% this year, the same are expected to rebound and grow at the rate of 8.6% in 2023. Its long-term (three to five years) estimated earnings growth rate of 5.7% promises rewards for investors.
The company’s 2022 sales are projected to fall marginally, while in 2023, sales will likely grow 3.7%.
This major global investment bank is rewarding investors handsomely through sustainable capital deployment plans, given its solid liquidity position and earnings strength. Following the 2021 stress test results, the company increased its buyback authorization to up to $12 billion through Jun 30, 2022. As of Dec 31, 2021, $5.6 billion worth of shares were left to be repurchased.
In July 2021, the company hiked its quarterly dividend by 100% to 70 cents per share. Based on the last day’s closing price, Morgan Stanley’s dividend yield is currently at 3.24%. Not only is the yield attractive for income investors, but it also represents a steady income stream. The yield is significantly impressive compared with the industry average of 0.37%.
Analysts seem to be optimistic regarding the company’s earnings prospects. The Zacks Consensus Estimate for earnings has been revised 4.2% and 2.8% upward for 2022 and 2023 in the past two months, respectively. Morgan Stanley currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conclusion
Based on the above discussion, one can easily conclude that Morgan Stanley stock is worth buying now on the back of its strong fundamentals and growth prospects. So, you shouldn’t wait anymore and buy this stock on the drop.
Stocks in the Same Industry Worth a Look
A couple of other stocks worth betting on are Piper Sandler Companies (PIPR - Free Report) and Raymond James (RJF - Free Report) . Both PIPR and RJF currently carry the same Zacks Rank as Morgan Stanley.
The Zacks Consensus Estimate for Piper Sandler’s current-year earnings has been revised 3.6% upward in the past 30 days. PIPR’s shares have risen 6.9% in the past year.
Raymond James recorded a marginal upward earnings estimate revision for fiscal 2022 over the past 30 days. The RJF stock has surged 22.2% in the past year.
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Morgan Stanley (MS) Down 15% YTD: Should You Buy on the Dip?
Markets have been extremely volatile since the beginning of 2022, with the ongoing Russia-Ukraine conflict adding fuel to the fire. This has also raised concerns regarding global economic growth. Amid such a bleak scenario, choosing stocks that will generate solid returns over time can be tricky.
All the major indexes are in red and witnessing major corrections. Finance sector companies are not untouched, in spite of gradual improvement in the operating backdrop. One such stock — Morgan Stanley (MS - Free Report) — is down 15% so far this year. The stock is even trading below the industry and the S&P 500 index, down 11.5% and 9.2%, respectively, in the same time frame.
At $83.45 per share, Morgan Stanley is currently trading at a price/tangible book value of 2.02X, way below the industry average of 3.17X. The company’s beaten-down stock price and cheap valuation might be a good entry point for investors.
Year to Date Price Performance
Image Source: Zacks Investment Research
Let’s check Morgan Stanley’s fundamentals before taking any investment decision.
Over the past several years, MS has been undertaking measures to become less dependent on capital markets and lower earnings volatility. These efforts have started bearing fruits as the company is focusing on the Wealth Management and Investment Management segments.
Morgan Stanley’s strategic expansion efforts, including the buyouts of Eaton Vance, E*Trade Financial and Shareworks, are steps in this direction. Both segments’ aggregate contribution to net revenues has jumped from 26% in 2010 to 51% in 2021.
The company’s partnership with MUFG is expected to continue supporting profitability. As China has opened up its financial markets for foreign firms since 2018, Morgan Stanley is taking full advantage of this. The company either has approval for 100% ownership of its local joint ventures (JVs) or obtained a majority stake in the JVs.
With the Federal Reserve signaling few interest rate hikes this year, the company is well poised to benefit from the same.
Performance of the company’s Institutional Securities segment, which depends on the performance of the capital markets, is a concern,. While overall segment revenues rose last year, the future performance of the segment remains uncertain as it depends on market developments and client volumes.
Morgan Stanley witnessed earnings growth of 20.2% in the past three to five years. While earnings are expected to decline 6.3% this year, the same are expected to rebound and grow at the rate of 8.6% in 2023. Its long-term (three to five years) estimated earnings growth rate of 5.7% promises rewards for investors.
The company’s 2022 sales are projected to fall marginally, while in 2023, sales will likely grow 3.7%.
This major global investment bank is rewarding investors handsomely through sustainable capital deployment plans, given its solid liquidity position and earnings strength. Following the 2021 stress test results, the company increased its buyback authorization to up to $12 billion through Jun 30, 2022. As of Dec 31, 2021, $5.6 billion worth of shares were left to be repurchased.
In July 2021, the company hiked its quarterly dividend by 100% to 70 cents per share. Based on the last day’s closing price, Morgan Stanley’s dividend yield is currently at 3.24%. Not only is the yield attractive for income investors, but it also represents a steady income stream. The yield is significantly impressive compared with the industry average of 0.37%.
Analysts seem to be optimistic regarding the company’s earnings prospects. The Zacks Consensus Estimate for earnings has been revised 4.2% and 2.8% upward for 2022 and 2023 in the past two months, respectively. Morgan Stanley currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conclusion
Based on the above discussion, one can easily conclude that Morgan Stanley stock is worth buying now on the back of its strong fundamentals and growth prospects. So, you shouldn’t wait anymore and buy this stock on the drop.
Stocks in the Same Industry Worth a Look
A couple of other stocks worth betting on are Piper Sandler Companies (PIPR - Free Report) and Raymond James (RJF - Free Report) . Both PIPR and RJF currently carry the same Zacks Rank as Morgan Stanley.
The Zacks Consensus Estimate for Piper Sandler’s current-year earnings has been revised 3.6% upward in the past 30 days. PIPR’s shares have risen 6.9% in the past year.
Raymond James recorded a marginal upward earnings estimate revision for fiscal 2022 over the past 30 days. The RJF stock has surged 22.2% in the past year.