Investors looking for stocks in the Financial - Investment Bank sector might want to consider either Morgan Stanley (MS) or Tradeweb Markets (TW). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Morgan Stanley and Tradeweb Markets have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
MS currently has a forward P/E ratio of 10.51, while TW has a forward P/E of 42.98. We also note that MS has a PEG ratio of 1.06. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TW currently has a PEG ratio of 3.31.
Another notable valuation metric for MS is its P/B ratio of 1.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TW has a P/B of 2.48.
These are just a few of the metrics contributing to MS's Value grade of B and TW's Value grade of F.
Both MS and TW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MS is the superior value option right now.