Here I am going to attempt to value Morgan Stanley, the New York based investment bank and wealth manager.
Morgan Stanley is currently valued at 91.67 billion USD by public markets in the USA. Is Morgan Stanley fairly valued? No. I think in the current growth environment Morgan Stanley is worth at least 10% more. Why? At a trailing Price/Earnings ratio of 11.08 and Price/Book Value ratio of 1.26 Morgan Stanley's current valuation multiples seems on the low end historically. It is remarkable, how in this 10 year long stocks bull market both Morgan Stanley and Goldman Sachs's market capitalizations have not appreciated more.
Morgan Stanley's two main business stables are securities trading and wealth management, which is essentially private banking. Morgan Stanley's securities business is not growing much along with the whole securities trading industry in the last 10 years. Morgan Stanley's wealth management business, on the other hand, is growing strongly and is the main contributor to Morgan Stanley's circa 20% growth in yearly revenue from 2016.
The world's financial assets are growing by 5-10% a year and this is a good omen for Morgan Stanley's wealth management business. I see Morgan Stanley growing both its private banking/wealth management share and securities trading share.
The 4th quarter 2019 Morgan Stanley's earnings were a blowout. Morgan Stanley's stock jumped by around 5%. All in all, I believe Morgan Stanley will grow its valuation by at least 10% from current levels in the next 1-2 years, barring an economic or financial shock that induces global economic recession.
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Petar
Vladimirov Posledovich is not liable for any investment losses incurred
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Respectfully yours,
Petar Posledovich
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