5 min read
If you have been watching Morgan Stanley recently, you are not alone. With many investors trying to figure out whether now is the right time to buy, hold, or cash out, the conversation has gotten interesting. Over the past five years, Morgan Stanley’s stock has soared an incredible 266.8%, and in just the past twelve months, jumped another 63.9%. Even more impressive, just this year, the shares have surged 25.3% already, catching the eye of both growth-minded investors and those seeking stability.
So, what is behind the recent uptick? Much of the upward momentum is driven by broader optimism in financial markets, especially as investors respond to shifting inflation expectations and a steady appetite for advisory services. These forces have made financial stocks like Morgan Stanley more attractive, pushing the price to a recent close of $156.39 and lifting its profile among Wall Street analysts.
But let’s get real. Strong price performance can attract enthusiasm, but it can also raise questions about whether the stock is still undervalued or has become too pricey. Using established valuation checks, Morgan Stanley currently scores a 3 out of 6, indicating it is undervalued by some standards but not across the board.
In the next section, we will break down the key valuation approaches for Morgan Stanley, helping you see where it shines and where caution is warranted. Stick around, because we will also explore a fresh angle that could offer a better framework for understanding just how undervalued or overvalued this bank might be.
The Excess Returns model is used to gauge a company’s ability to generate returns above its cost of equity. This model focuses on how effectively a company reinvests capital and grows shareholder value. It is particularly useful when analyzing financial stocks, where stable profits and prudent capital allocation often drive value.
Several key figures stand out for Morgan Stanley. The book value is $61.59 per share, and the average return on equity is 14.97%. Analysts project a stable EPS of $9.84 per share, calculated from future return on equity estimates by 12 analysts. When compared to the calculated cost of equity of $6.41 per share, this results in an excess return of $3.43 per share. The stable book value is also estimated at $65.73 per share, based on consensus among 14 analysts.
Using these inputs, the Excess Returns model estimates an intrinsic value for Morgan Stanley of $117.19 per share. With the current market price at $156.39, this valuation suggests the stock is approximately 33.5% overvalued at this time. While the company’s profitability is healthy, the price appears well ahead of fundamentals when assessed with this model.
