What Makes Morgan Stanley (MS) Stock a Must Buy Right Now?
Seems wise to invest in the world’s largest investment bank Morgan stanley MS now. Despite a difficult operating environment and low interest rates, the company is well positioned for revenue growth. In addition, a strong balance sheet bodes well for the future.
In addition, analysts are bullish on the title. Zacks’ consensus estimate for company earnings has been revised up 26.3% and 5.6% over the past 60 days, for 2020 and 2019, respectively. The stock currently sports a Rank 1 of Zacks (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.
The company’s pricing performance also looks impressive. Over the past year, the stock has gained 24.2%, outperforming the industry7.5% increase.
Here’s why the stock is worth considering
Strength of gains: Morgan Stanley profits have grown at a rate of 21.5%, over the past three to five years, above the industry average of 20.4%. This momentum is expected to continue, as evidenced by its projected profit growth of 1.4% for 2020.
In addition, the company’s projected long-term earnings growth rate of 9.6% promises rewards for shareholders.
In addition, Morgan Stanley has an impressive history of earnings surprises. Its profits have beaten Zacks’ consensus estimate in three of the past four quarters, the average pace being 24.8%.
Increased income: Morgan Stanley’s organic growth remains strong. Revenue has seen a compound annual growth rate of 4.2% over the past five years (2015-2019). Normalized levels of trading activity, strategic buyouts, focus on wealth management operations and focus on improving corporate lending activities are expected to continue to increase revenues.
In addition, Morgan Stanley developed in an inorganic way. The Shareworks deal and the planned acquisition of E * Trade Financial ETFC are likely to further strengthen its finances.
In addition, revenues are expected to grow at the rate of 2.3% for 2020 and 1.4% for 2021.
Solid balance sheet: As of June 30, 2020, Morgan Stanley had total borrowings of $ 205.5 billion, more than cash and cash equivalents worth $ 106.3 billion. However, loans worth only $ 20.1 billion are expected to mature within the next 12 months (after the end of the second quarter).
In addition, the company’s total debt to total equity of 70% at the end of the second quarter of 2020 has remained stable within this range in recent quarters. Thus, despite a higher debt burden, the company should be able to meet its short-term debt obligations, even if the economic situation worsens, due to its sufficient liquidity position.
Sustainable capital deployments: We remain encouraged by Morgan Stanley’s capital deployment activities. In June 2020, the company authorized the annual stress test and announced its intention to continue to hold the dividend at the current level of 35 cents per share. Based on the previous day’s closing price of $ 52.75, the company’s dividend yield stands at 2.63%, above the 1.60% of the S&P 500.
Additionally, like other large global financial firms such as JPMorgan JPM, Bank of America and Goldman Sachs GS, the company has suspended share buybacks for the third quarter of 2020. Nonetheless, given its strong liquidity situation and solid earnings, it should be able to support current capital deployments.
The action seems undervalued: Morgan Stanley appears undervalued when it comes to its price-to-earnings (P / E) and price-to-book (P / B) ratios. The company’s P / E (F1) and P / B ratios of 10.48 and 1.06, respectively, are lower than industry averages of 14.74 and 1.69.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.