MORGAN STANLEY (MS): what the price requires
At today's price, MORGAN STANLEY (MS) is priced for +18.8% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/MS
Headline
| Field | Value |
|---|---|
| Ticker | MS |
| Company | MORGAN STANLEY |
| Current price | $221.07/sh |
| Composition | Institutional Securities 46% / Wealth Management 44% / Investment Management 9% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | fee-financial |
| Implied earnings growth | 18.8% |
| Price-to-earnings | 27.2x |
| Earnings yield | 3.7% |
A hybrid: a fee franchise alongside a sizeable balance sheet, valued here on the fee annuity.
Solve inputs: computed at a 10.9% cost of equity with 4% terminal growth over a 5-year stage, on a 5-year median GAAP earnings base.
Reconcile: at the x-ray's 9.3% required return this reads ~11.5%/yr; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.51σ |
| cohort percentile (of 49 peers) | 67 |
| sustained it ~5 years at this level | 28% |
Valuation X-Ray
The price is supported by earnings-power and relative-multiple and growth-DCF value, while asset-based lands below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.51x | 4 | expensive |
| Earnings | 1.24x | 2 | expensive |
| Relative | 0.93x | 4 | justifies |
| Growth | 1.03x | 1 | expensive |
Families that justify the price: Earnings, Relative, Growth Families that call it expensive: Asset
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.6%); the inversion above states its own rate.
Per-Model Detail (n=11)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $0.00 | — | no | Negative/zero FCF — equity value floored at $0 |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $185.91 | 1.19x | yes | P/E 14.17x (blended: static sector reference 12x + trailing (TTM) 19x), scenarios: 11.6x / 14.2x / 16.7x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $124.25 | 1.78x | yes | BV/sh $73.21, ROE (TTM) 15.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $159.84 | 1.38x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $213.94 | 1.03x | yes | Rev $73.5B, growth 14% (input: historical growth; tapered), Terminal P/S: 3.9x / 4.7x / 5.6x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $325.88 | 0.68x | yes | EPS $11.04, growth 30% (input: historical EPS growth), PEG=0.65 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $162.97 | 1.36x | yes | BV $73.21 + 5yr PV of (ROE (TTM) 15.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $134.86 | 1.64x | yes | √(22.5 × EPS $11.04 × BVPS $73.21) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $356.22 | 0.62x | yes | EPS $11.04 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $139.88 | 1.58x | yes | Revenue $73.49B × sector P/S 3.0x |
| PEG Fair Value | Relative | $414.00 | 0.53x | yes | EPS $11.04 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $119.35 | 1.85x | yes | EPS $11.04 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Share count CAGR (buyback) | -2.7% |
Custody and consolidated-fund balance sheet: deposits, client cash, and fund-level debt are not corporate leverage, and operating cash flow follows client flows. Net-debt, coverage, and cash-burn lenses are suppressed as misleading; share-count CAGR is kept. The fee-earnings read above is the valuation basis.
Bullet Takeaways
Morgan Stanley is best read as a fee franchise wearing a bank's balance sheet. The durable value sits in Wealth Management, which posted record net revenue of $8.5 billion in Q1 2026 on $118.4 billion of net new assets, an annuity-like stream the price is really paying for.
The quarter was a peak. Q1 2026 delivered record revenue of $20.6 billion, EPS of $3.43, and a 27.1% return on tangible equity, with trading and investment banking each up sharply, the cyclical engine running hot.
The methods disagree, and the disagreement is the warning. The fee-financial reverse-DCF and excess-return methods land near $122 to $195, below the $223 (as of June 27, 2026) price, while EPS-extrapolation methods sit far above on cyclical-peak earnings. At about 28x earnings, the priced-in fee growth is elevated.
Bull Case
Valuing Morgan Stanley starts with seeing what it has become: not a trading house with a brokerage attached, but a wealth-and-investment-management franchise with an institutional securities business attached. The durable value is the fee annuity. Wealth Management posted record net revenue of $8.5 billion in Q1 2026 on $118.4 billion of net new assets and $53.7 billion of fee-based flows, and the filing describes the quality of that revenue: it comes from "advisory services associated with fee-based assets, account service and administration, as well as distribution of products," generally "based on the net as"set levels under management (FY2025 10-K, accession 0000895421-26-000086). Fee-based asset revenue recurs with the asset base rather than with any single quarter's markets, which is why the model values the company on its fee annuity, where its franchise value sits.
The scale of that annuity is the bull case. Total client assets across Wealth and Investment Management reached $9.3 trillion, with over $350 billion of net new assets in 2025, a flywheel that compounds fee revenue as advisors gather assets and convert them to advisory relationships.
The institutional side adds powerful upside in good markets. Q1 2026 institutional securities revenue rose to $10.7 billion, with investment banking up 36% and both equity and fixed-income trading up more than 20%, the filing noting these are "fees earned from underwriting equity and fixed income securities" and advisory work (accession 0000895421-26-000086). The company has been buying back stock, reducing the share count about 2.7% a year. For a buyer who believes the wealth flywheel keeps compounding and the firm captures the capital-markets recovery, the bull case is a high-ROTCE fee compounder with cyclical optionality on top.
Bear Case
The valuation methods are pulling in opposite directions, and which set you trust decides the entire call. On the conservative side, the methods that respect the cycle land below the price: the fee-financial reverse-DCF band at $122 to $195, Simple Excess Return at $124, Residual Income at $163, Earnings Yield at $119, and Relative Valuation at $187. The conservative cluster is the honest read, because the optimistic methods extrapolate a cyclical-peak EPS as if it were a permanent run-rate.
The reason to distrust the peak is that half the company is inherently cyclical. Institutional Securities revenue of $10.7 billion in Q1 2026, with investment banking up 36% and trading up over 20%, reflects unusually strong capital markets, not a baseline. Underwriting and advisory fees swing hard with deal volume and market conditions, and the same lines that lifted the quarter can fall just as fast when issuance and trading cool. At about 28x earnings the price embeds roughly 19% annual fee-earnings growth, a pace only about 27% of fee firms have sustained for five years, and the model flags the assumption as elevated and in the upper half of the fee-financial peer group.
The balance sheet adds a tail risk the fee narrative glosses over. Morgan Stanley extends margin, commercial real estate, and securities-based loans, and the filing references its provision for credit losses tied to "commercial real estate and securities-based loans, and portfolio growth" (FY2025 10-K, accession 0000895421-26-000086), with margin lending balances rising sharply year over year. In a downturn, loan losses and weaker markets would hit at the same time the cyclical fee lines fade.
Valuation
Morgan Stanley is a hybrid, and the model values it on the fee annuity where its franchise value sits rather than on a balance sheet of deposits, client cash, and fund-level debt that are not corporate leverage. On that basis the price reads off price-to-earnings: at $223.19 the stock trades near 28x earnings, a 3.6% earnings yield, which inverts into an assumption that fee earnings grow about 19% a year over a five-year stage, computed at a 10.9% cost of equity. That pace is within what the firm has delivered in a strong cycle, but it sits in the upper half of the fee-financial group and only about 27% of fee firms have sustained it for five years, so the reverse solve labels it elevated.
The disagreement across methods is the central feature. The conservative, cycle-aware methods land below the price: the fee-financial reverse-DCF band at $122 to $195 with a base near $155, Simple Excess Return at $124, Residual Income at $163, and Earnings Yield at $119. The aggressive EPS-growth methods land far above: Peter Lynch at $326, Ben Graham Formula at $356, PEG at $414. The split is not noise; it is the difference between pricing a normalized fee annuity and extrapolating cyclical-peak trading and banking earnings.
The synthesis is a high-quality franchise trading above its normalized fee value on peak earnings. The gap to $223 is the premium the market assigns to the wealth-management flywheel and the current capital-markets strength. That premium is defensible given a 27% ROTCE, but it is a premium, not a discount, and it assumes both the fee growth and the cyclical revenue hold. The model disagreement is the reminder that the bullish methods are leaning on a peak the cycle does not guarantee will last.
Catalysts
The recent results were records. Full-year 2025, reported January 2026, delivered net revenue of $70.6 billion, EPS of $10.21, ROTCE of 21.6%, and $9.3 trillion of client assets. Q1 2026 was stronger still: record revenue of $20.6 billion, EPS of $3.43, ROTCE of 27.1%, record Wealth Management revenue of $8.5 billion on $118.4 billion of net new assets, and Institutional Securities of $10.7 billion with investment banking up 36% (Morgan Stanley investor relations; StockTitan; TIKR).
The forward set centers on whether the peak holds. Management guided Q2 to Q3 2026 EPS to a $2.63 to $3.14 range, below the Q1 record, and the swing factors are the durability of net new asset flows in Wealth Management, the trajectory of investment-banking and trading revenue as capital markets normalize, net-interest income on the lending book, and credit costs on commercial real estate and securities-based loans. With the price reflecting a fee-franchise premium on strong cyclical earnings, the key question each quarter is how much of the institutional strength persists versus reverts.
Sources: Morgan Stanley FY2025 and Q1 2026 results (Morgan Stanley investor relations; MS 8-K, 2026; StockTitan); TIKR and FinancialContent earnings coverage; Motley Fool transcript (2026).
Peer Cohorts (Per Segment, With Filing Citations)
Institutional Securities (reported)
- GS (The Goldman Sachs Group, Inc.)
- (no filing in the citation store)
- JPM (JPMORGAN CHASE & CO)
- (no filing in the citation store)
- JEF (Jefferies Financial Group Inc.)
- (no filing in the citation store)
- BAC (BANK OF AMERICA CORP /DE/)
- (no filing in the citation store)
- C (Citigroup Inc)
- (no filing in the citation store)
- EVR (EVERCORE INC.)
- (no filing in the citation store)
- LAZ (Lazard, Inc.)
- (no filing in the citation store)
- PJT (PJT Partners Inc.)
- (no filing in the citation store)
Wealth Management (reported)
- SCHW (SCHWAB CHARLES CORP)
- (no filing in the citation store)
- LPLA (LPL Financial Holdings Inc.)
- (no filing in the citation store)
- RJF (RAYMOND JAMES FINANCIAL INC)
- (no filing in the citation store)
- AMP (AMERIPRISE FINANCIAL INC)
- (no filing in the citation store)
- SF (STIFEL FINANCIAL CORP)
- (no filing in the citation store)
- BK (THE BANK OF NEW YORK MELLON CORPORATION)
- (no filing in the citation store)
Investment Management (reported)
- BLK (BlackRock, Inc.)
- (no filing in the citation store)
- TROW (PRICE T ROWE GROUP INC)
- (no filing in the citation store)
- IVZ (Invesco Ltd.)
- (no filing in the citation store)
- BEN (FRANKLIN RESOURCES, INC.)
- (no filing in the citation store)
- AMG (AFFILIATED MANAGERS GROUP, INC.)
- (no filing in the citation store)
- APAM (Artisan Partners Asset Management Inc.)
- (no filing in the citation store)
- VCTR (Victory Capital Holdings, Inc.)
- (no filing in the citation store)
- WT (WisdomTree, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.