Today we're going to take a look at the well-established Morgan Stanley (NYSE:MS). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Morgan Stanley’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Morgan Stanley?
According to my valuation model, Morgan Stanley seems to be fairly priced at around 19.96% above my intrinsic value, which means if you buy Morgan Stanley today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $40.90, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Morgan Stanley’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Morgan Stanley generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 0.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Morgan Stanley, at least in the short term.
What this means for you:
Are you a shareholder? MS’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on MS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Morgan Stanley. You can find everything you need to know about Morgan Stanley in the latest infographic research report. If you are no longer interested in Morgan Stanley, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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