Contrasting Morgan Stanley (NYSE:MS) & The Charles Schwab Corporation (SCHW)

Morgan Stanley (NYSE: MS) and The Charles Schwab Corporation (NYSE:SCHW) are both large-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, analyst recommendations, dividends, earnings, institutional ownership and profitability.

Risk & Volatility

Morgan Stanley has a beta of 1.63, suggesting that its share price is 63% more volatile than the S&P 500. Comparatively, The Charles Schwab Corporation has a beta of 1.64, suggesting that its share price is 64% more volatile than the S&P 500.

Earnings and Valuation

This table compares Morgan Stanley and The Charles Schwab Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Morgan Stanley $37.18 billion 2.30 $6.41 billion $3.49 13.35
The Charles Schwab Corporation $8.08 billion 6.66 $2.00 billion $1.49 26.99

Morgan Stanley has higher revenue and earnings than The Charles Schwab Corporation. Morgan Stanley is trading at a lower price-to-earnings ratio than The Charles Schwab Corporation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Morgan Stanley and The Charles Schwab Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Morgan Stanley 16.77% 9.83% 0.84%
The Charles Schwab Corporation 26.73% 15.41% 0.98%

Institutional & Insider Ownership

85.2% of Morgan Stanley shares are held by institutional investors. Comparatively, 79.6% of The Charles Schwab Corporation shares are held by institutional investors. 0.4% of Morgan Stanley shares are held by insiders. Comparatively, 12.0% of The Charles Schwab Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Dividends

Morgan Stanley pays an annual dividend of $1.00 per share and has a dividend yield of 2.1%. The Charles Schwab Corporation pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. Morgan Stanley pays out 28.7% of its earnings in the form of a dividend. The Charles Schwab Corporation pays out 21.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Morgan Stanley has increased its dividend for 3 consecutive years. Morgan Stanley is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent recommendations for Morgan Stanley and The Charles Schwab Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Morgan Stanley 1 6 15 1 2.70
The Charles Schwab Corporation 0 6 10 0 2.63

Morgan Stanley presently has a consensus target price of $48.84, indicating a potential upside of 4.81%. The Charles Schwab Corporation has a consensus target price of $45.27, indicating a potential upside of 12.58%. Given The Charles Schwab Corporation’s higher possible upside, analysts plainly believe The Charles Schwab Corporation is more favorable than Morgan Stanley.

About Morgan Stanley

Morgan Stanley is a financial holding company. The Company’s segments include Institutional Securities, Wealth Management and Investment Management. The Company’s Institutional Securities business segment provides investment banking, sales and trading, and other services to corporations, governments, financial institutions and high-to-ultra high net worth clients. The Company’s Wealth Management business segment provides an array of financial services and solutions to individual investors and small-to-medium sized businesses and institutions covering brokerage and investment advisory services, market-making activities in fixed income securities, financial and wealth planning services, annuity and insurance products, credit and other lending products, banking and retirement plan services. The Company’s Investment Management business segment provides a range of investment strategies and products.

About The Charles Schwab Corporation

The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, ETFs, advice solutions, banking and trust. Brokerage provides a range of brokerage accounts with cash management capabilities. Mutual funds offer third-party mutual funds through the Mutual Fund Marketplace.

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