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Monday, August 3, 2020

Is Morgan Stanley (MS) a Profitable Stock to Pick Right Now?

Is Morgan Stanley (MS) a great pick from the value investor’s perspective right now? Read on to know more.
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Morgan Stanley has a trailing twelve months PE ratio of 11.09, as you can see in the chart below:

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, the stock has a P/S ratio of about 1.99. This is substantially lower than the S&P 500 average, which comes in at 3.42 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.

In aggregate, Morgan Stanley currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes MS a solid choice for value investors and some of its other metrics make it clear too.

Though Morgan Stanley might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of A. This gives MS a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>).

Meanwhile, the company’s recent earnings estimates have been encouraging The current quarter has seen five estimates go higher in the past sixty days and none lower, while current year  estimate has seen six upward and one downward revision in the same time period.

This has had a noticeable impact on the consensus estimate. The current quarter consensus estimate has risen 34.5% in the past two months, while the current year estimate has improved 8.9% in the same time period. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Morgan Stanley Price and Consensus

Morgan Stanley price-consensus-chart | Morgan Stanley Quote

Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.

Morgan Stanley is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.  Moreover, a strong industry rank (Top 31% out of more than 250 industries) further supports the growth potential of the stock. However with a Zacks Rank#3 , it is hard to get excited about the stock overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:

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