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Morgan Stanley (NYSE:MS) is a financial services stock. The allure of MS is its perceived value: like many financial companies it trades at a cheap price-to-book multiple. There is much attention paid to financials as a potential contrarian, value investment thesis. Should retail investors snatch up financial stocks like MS?

Not necessarily. As a financial institution, the book value of its assets is questionable because of mark-to-model accounting. Valid comparisons between MS and non-financial stocks can be made by using other price multiples like the price-to-sales, the price-to-earnings multiple, or even dividend yield (dividend-to-price). Fortunately, there are non-financial stocks which appear to be better values than MS:

Ticker

Company

Industry

P/E

P/S

Div Yield

AEA

Advance America, Cash Advance Centers

Credit Services

8.73

0.83

3.1%

CAH

Cardinal Health, Inc.

Drugs Wholesale

15.34

0.14

2.1%

CEC

CEC Entertainment Inc.

Restaurants

13.09

0.84

2.4%

DRI

Darden Restaurants, Inc.

Restaurants

15.17

0.82

3.5%

EBF

Ennis Inc.

Office Supplies

11.32

0.82

3.8%

IMKTA

Ingles Markets Inc.

Grocery Stores

10.22

0.12

3.8%

NAFC

Nash Finch Co.

Food Wholesale

8.72

0.07

2.4%

NHC

National Healthcare Corp.

Long-Term Care Facilities

11.55

0.83

2.6%

NTRI

Nutrisystem, Inc.

Consumer Services

15.63

0.75

6.2%

PPG

PPG Industries Inc.

Specialty Chemicals

13.18

0.94

2.5%

SPLS

Staples, Inc.

Specialty Retail, Other

10.77

0.41

2.7%

TESS

TESSCO Technologies Inc.

Electronics Wholesale

9.99

0.21

3.3%

WSTG

Wayside Technology Group, Inc.

Computers Wholesale

10.78

0.24

5.0%

MS

Morgan Stanley

Investment Brokerage

16.25

0.97

1.0%

Each of these stocks is cheaper than MS based on dividend yield, P/E, and P/S multiples (trailing 12 months). Moreover, these five companies all score well in terms of quality and future growth prospects. They each have 10 fiscal years of positive returns to equity and have are all categorized as "safe" according to the Altman Z-score, indicating that they are not alarming bankruptcy risks:

Ticker

Altman Z-score

10-Year Average ROE

EPS growth past 5 years

EPS growth next 5 years

AEA

4.92

8.7%

-5.1%

15.0%

CAH

5.60

16.2%

0.2%

12.1%

CEC

3.64

24.5%

5.8%

11.0%

DRI

3.07

23.1%

8.8%

12.3%

EBF

4.60

11.0%

1.8%

17.0%

IMKTA

3.01

10.5%

-1.7%

13.3%

NAFC

5.61

8.5%

5.3%

15.0%

NHC

3.47

13.8%

7.5%

12.0%

NTRI

8.00

38.9%

13.0%

14.0%

PPG

3.30

15.6%

10.1%

10.7%

SPLS

4.09

16.4%

3.1%

11.4%

TESS

5.63

9.5%

19.0%

15.0%

WSTG

5.71

10.3%

10.7%

22.0%

MS

*N/A

7.4%

-26.7%

10.7%

*Financial firms cannot be assigned an Altman Z-score

Based on lower price multiples, these stocks are cheaper than MS at current market prices. Better yet, they are all quality stocks. Rather than restrict yourself to controversial financial stocks, consider a mix of these thirteen securities as a more attractive alternative. They are quality firms with better metrics for growth and value. Clearly Morgan Stanley is not the only fish in the sea, and it does not appear to be the tastiest either.

Please read the article disclaimer for this article and Altman Z-score calculations.

Source: 13 Non-Financials To Trump Morgan Stanley