MS Stock Report

2-Year Price History

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A Word Of Caution

Morgan Stanley (MS) has experienced a very significant drop in earnings and/or earnings estimates. In and of itself this drop in earnings could be an indication of greater troubles within the company.

Please take a moment to look at the RazorWire feed on the right hand side of the report to find more information regarding the company's dropoff in performance. Each time Morgan Stanley is mentioned on business television recently should be displayed. This helps bring you up to date on any major issues they are facing right now.

Therefore, (and as always), check additional sources and available information regarding MS before making an investment decision.

Ockham's Rating

MS Revenue

As a value investing shop, we are interested in seeing how MS's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.12x and the low end of the range at 0.61x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for MS of 0.80x is slightly under its historical average. This level of Price to Sales gives us a fairly neutral position on the MS shares. We would like to see a drop in the Price to Sales ratio just a little bit more (given current sales figures) before we would become more positive on a Price to Sales basis. Such a drop would increase the attractiveness of the stock but, as always, would need to be considered in the context of all other valuation factors.

MS Cash Earnings

When reviewing a company and their prospects for success, it is necessary to analyze their ability to generate positive Cash Earnings. This is a vital component to our analysis, because as a long term investment research firm, there are few factors more closely tied to the valuation of a company as Cash Earnings. In the case of MS, it appears that either the current estimate for Cash Earnings is negative or MS is not likely to generate positive Cash Earnings based upon their prior performance in the last several quarters. Remember that Cash Earnings is not the only way to value a company's potential, but in our analysis it is the most important. Thus, for our analysis MS receives a negative score from a Cash perspective. At Ockham, we are fond of saying "Cash is King," and in this case the company is not generating any. If a company is not able to generate a profit then there is no reason to invest in them. Unless of course you believe in the story, and hope it will eventually lead to a profitable enterprise.

MS Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for MS to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for MS is $0.20 producing a current dividend yield of 0.74%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from MS against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from MS over previous years was 16.19% while the lowest dividend yield was 0.43%. It is never a good sign for a company to pay significantly lower dividends, in this case 91.10% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.