Market Overview

5 Reasons To Consider Buying Morgan Stanley Stock


The banking industry remains well positioned for growth, supported by benefits from a stabilizing economy and an improving interest-rate scenario. Also, the tax overhaul and expected ease in regulations are likely to bring in more benefits for banks.

Moreover, during the first quarter of 2018, investment banks, in particular, benefited from higher trading activities as volatility was back in the markets.

Thus, it seems to be a wise idea to add some banking stocks to your portfolio now. Today, we bring to you one investment banking stock, Morgan Stanley (NYSE: MS), which, given its strengthening balance sheet and cost-reduction initiatives, is well poised for growth.

Here are some other factors that make Morgan Stanley an attractive investment option right now.

Earnings Per Share Strength: Morgan Stanley's earnings have grown at the rate of 14.3% over the last three to five years, higher than the industry average of 10.5%. This momentum is expected to continue in the near term as evident by its projected EPS growth rate of 31.2% and 6.4% for 2018 and 2019, respectively. Further, the company's long-term projected EPS growth rate of 12.7% promises reward for shareholders.

Revenue Growth: Morgan Stanley's organic growth remains strong. Revenues witnessed a compound annual growth rate (CAGR) of 3.4% over the last four years (2014-2017). Driven by a steady focus on wealth management operations, the top line is projected to increase 6.2% in 2018, higher than 4.6% growth recorded by the industry.

Prudent Cost Control: Morgan Stanley's efforts to restructure and streamline its operations have helped  lower expenses. As part of its cost-saving plan — Project Streamline — the company successfully achieved the cost-saving target of $1 billion by 2017. While expenses may rise as the company continues to invest in franchises, overall costs are expected to be manageable in the quarters ahead.

Impressive Capital Deployment: Morgan Stanley's capital deployment plan is commendable. Its 2017 capital plan included a 25% dividend hike and $5-billion share-repurchase authorization. Given its solid liquidity position and earnings strength, the company is likely to be able to sustain this level of capital deployments.

Stock Looks Undervalued: Morgan Stanley looks undervalued with respect 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 11.7 and 1.4, respectively, are below the industry averages of 16.6 and 1.7.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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