How Morgan Stanley’s (NYSE:MS) Earnings Growth Stacks Up Against The Industry

When Morgan Stanley (NYSE:MS) released its most recent earnings update (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Morgan Stanley’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not MS actually performed well. Below is a quick commentary on how I see MS has performed.


See our latest analysis for Morgan Stanley

Did MS’s recent performance beat its trend and industry?

MS’s trailing twelve-month earnings (from 31 March 2018) of US$6.32b has
increased by 0.17% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 23.51%, indicating the rate at which MS is growing has slowed down.
Why could this be happening? Well,
let’s look at what’s
going on
with margins and
whether
the
whole
industry
is experiencing the hit as well.

Over the
past
couple of years,
revenue growth has
been lagging behind
which
indicates that
Morgan Stanley’s bottom line has been
propelled by
unmaintainable
cost-reductions.
Looking at
growth from a sector-level, the
US
capital markets industry has been
growing its average earnings by double-digit 14.43%
in the
previous
twelve months,
and 12.90% over the
past five years.
This means that
any
uplift
the industry is
profiting from,
Morgan Stanley has not been able to
leverage it as much as its
industry peers.


NYSE:MS Income Statement June 14th 18
NYSE:MS Income Statement June 14th 18

In terms of returns from investment, Morgan Stanley has
not invested its equity funds well, leading to a 8.74% return on equity (ROE), below the sensible minimum of 20%.
Furthermore, its return on assets (ROA) of 0.74% is below the US Capital Markets industry of 4.64%, indicating Morgan Stanley’s are utilized less efficiently.
And finally, its return on capital (ROC), which also accounts for Morgan Stanley’s debt level, has declined over the past 3 years from 2.81% to 2.66%.

What does this mean?

Morgan Stanley’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story.
Companies that have performed well in the past, such as Morgan Stanley gives investors conviction. However, the next step would be to assess whether the future looks as optimistic.
I suggest you
continue to research Morgan Stanley to get a
more holistic view
of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MS’s future growth? Take a look at our free research report of analyst consensus for MS’s outlook.
  2. Financial Health: Is MS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.

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