Since April 2021, the S&P 500 has delivered a total return of 70.5%. But one standout stock has nearly doubled the market - over the past five years, Morgan Stanley has surged 126% to $186.31 per share. Its momentum hasn’t stopped as it’s also gained 12.7% in the last six months thanks to its solid quarterly results, beating the S&P by 8%.
Is now the time to buy Morgan Stanley, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Morgan Stanley Not Exciting?
Despite the momentum, we're cautious about Morgan Stanley. Here are three reasons there are better opportunities than MS and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
Over the last five years, Morgan Stanley grew its revenue at a mediocre 6.1% compounded annual growth rate. This was below our standard for the financials sector.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Morgan Stanley’s unimpressive 7.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
3. Steady Increase in TBVPS Highlights Solid Asset Growth
In the financials industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.
Although Morgan Stanley’s TBVPS increased by a meager 5.1% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at a solid 10.3% annual clip over the past two years (from $41.07 to $50.00 per share).
Final Judgment
Morgan Stanley isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 16× forward P/E (or $186.31 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our top software and edge computing picks.
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