Why Morgan Stanley Is Back in Focus for Stock Investors

Morgan Stanley (MS) is under fresh scrutiny after reports that bankers were pressured to approve mortgages for wealthy clients, while the company is also active in the bond market and pursuing a large open-ended share buyback.

Morgan Stanley’s recent headlines around internal mortgage practices and fresh bond issuance come after a strong run, with the share price returning 15.68% year to date and a 1 year total shareholder return of 54.71%, while multi year total shareholder returns above 140% suggest momentum has been building.

If this mix of governance questions and capital returns has you thinking more broadly about financial stocks, it can also be useful to widen the lens and review other large listed institutions or diversified financial groups through a dedicated screener such as 18 top founder-led companies

Morgan Stanley now trades about 12% below the average analyst price target, while the stated intrinsic value sits slightly above the current share price. Is that a margin of safety or a warning that caution is justified?

Most Popular Narrative: 3.4% Undervalued

The most followed narrative currently places Morgan Stanley’s fair value at $217.86, a touch above the last close at $210.42. This frames the recent buyback and bond activity in a different light for valuation focused investors.

The ongoing increase in global wealth, combined with the accelerating intergenerational transfer of assets, is boosting demand for comprehensive advisory and wealth management solutions evidenced by record net new assets and a growing client base which should drive higher recurring fee-based revenue and long-term earnings growth.

Read the complete narrative. Read the complete narrative.

Want to see what sits behind that fair value for Morgan Stanley? The narrative focuses on steady revenue expansion, resilient margins, and a richer future earnings multiple baked into long term forecasts.

Result: Fair Value of $217.86 (UNDERVALUED)

However, this Morgan Stanley narrative could be knocked off course if the shift toward low fee passive products accelerates or if regulatory demands push costs higher and margins lower.

Another View On Morgan Stanley’s Valuation

While the current fair value narrative suggests Morgan Stanley is about 3.4% undervalued at $217.86, our DCF model points in a different direction. At a DCF estimate of $205.41, the stock at $210.42 screens as slightly overvalued instead of cheap. Which set of assumptions is closer to your view?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Morgan Stanley for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals around Morgan Stanley have you unsure, now is a good time to review the data and weigh both sides for yourself. To see the key risks some investors are focused on alongside the rewards others are optimistic about, start with the 3 key rewards and 2 important warning signs

Looking For More Investment Ideas Beyond Morgan Stanley?

If Morgan Stanley has sharpened your focus on opportunities, do not stop here. Broaden your watchlist now so you do not miss the next idea.

• Target potential long term compounders by checking companies that appear discounted on quality and valuation through the 55 high quality undervalued stocks.
• Strengthen your income options by reviewing companies with robust payouts and higher yields via the 9 dividend fortresses.
• Prioritise resilience by scanning businesses with healthier finances and sturdier fundamentals using the solid balance sheet and fundamentals stocks screener (45 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.