Morgan Stanley ( MS Quick Quote MS - Free Report) stock looks like an attractive investment option now. The company has entered a strategic alliance with MUFG, which is expected to bolster its presence in Japan. Moreover, its initiatives to become less dependent on capital markets-driven revenue sources, along with the inorganic growth efforts, will likely keep supporting the top line. Over the past 30 days, the Zacks Consensus Estimate for MS’ current-year earnings has been unchanged. The company currently carries a Zacks Rank #2 (Buy). Looking at its price performance, over the past year, shares of Morgan Stanley have gained 0.9% against the industry’s decline of 0.7%.
Image Source: Zacks Investment Research
A few other factors mentioned below make Morgan Stanley a solid pick now.
Earnings Strength: MS’ earnings have grown at a rate of 11.5% over the past three to five years. While its earnings are projected to decline 8.3% this year, the trend will likely reverse after that. In 2024, the company’s earnings are expected to grow 22.5%. Moreover, Morgan Stanley has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the positive surprise being 4.2%, on average. Revenue Growth: Morgan Stanley’s top-line growth is impressive. Net revenues witnessed a compound annual growth rate of 7.6% over the last four years (2018-2022), with the upward trend continuing in the first half of 2023. Given the higher interest rates, decent loan demand, the company’s strategic buyouts, and its focus on the wealth management and investment management segments (that are less dependent on the capital markets and are less volatile revenue sources), its top line is expected to keep improving. In 2023 and 2024, revenues are expected to grow 2.1% and 6.8%, respectively. Balance Sheet Strength: As of Jun 30, 2023, MS had long-term debt of $243.8 billion, with only $22.3 billion expected to mature over the next 12 months. The company’s average liquidity resources were $310.7 billion as of the same date. Moreover, investment-grade long-term credit ratings of A1/ A-/A+ from Moody’s, S&P Global Ratings and Fitch Ratings, respectively, as of Jul 31, 2023, and a stable outlook render Morgan Stanley favorable access to the debt market. Thus, the company is expected to be able to meet near-term debt obligations, even if the economic situation worsens, given its sufficient liquidity position. Sustainable Capital Distributions: Following the 2023 stress test results, Morgan Stanley increased its quarterly dividend by 10% to 85 cents per share and reauthorized a new multi-year share repurchase program of up to $20 billion, beginning in the third quarter of 2023. Given a solid liquidity position and earnings strength, Morgan Stanley is expected to continue enhancing shareholder value through efficient capital distribution activities in the future. Valuation Favorable: Morgan Stanley’s stock seems to be trading at a discount with respect to its price/book (P/B) and price/earnings (P/E) ratios. Currently, it has a P/B ratio of 1.50, below the industry average of 2.05. Also, its P/E (F1) ratio of 14.25 compares favorably with the industry’s 17.06. Other Stocks Worth Considering
A couple of other top-ranked stocks from the same space are
Interactive Brokers ( IBKR Quick Quote IBKR - Free Report) and Tradeweb Markets ( TW Quick Quote TW - Free Report) . IBKR and TW currently carry a Zacks Rank #2. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Over the past 60 days, the Zacks Consensus Estimate for IBKR’s current-year earnings has been revised marginally higher. Over the past year, the IBKR stock has gained 32.2%. Earnings estimates for TW have been unchanged for the current year over the past 60 days. Over the past year, TW’s shares have rallied 37.6%.