A part of the financial sector, Morgan Stanley (MS, Financial) provides financial services to a wide range of customers from financial institutions to governments and from corporations to individuals. The company has a global presence. It provides consultancy on joint ventures, mergers and acquisitions, recapitalization, shareholder relation and in many more areas pertaining to the corporate sector. The company started out business in the U.S. where it was founded in 1924 and today its major office is situated in New York. The major competitors of the company are Citigroup Global Markets Inc. The Goldman Sachs Group Inc. (GS, Financial), and Merrill Lynch Inc.
Morgan Stanley is usually considered a safe investment. To prove it, the company’s total revenues invariably have been increasing over the past three years. From $26,178,000 in 2012, the company increased to $32,493,000 in 2013 and to $34,275,000 in 2014. The total revenue growth during this period has been 24% in 2013 and 5% in 2014. The revenue growth has been stable, and the trend is expected to persist in the future as well.
The corresponding increase for income was impressive. Net income in 2013 jumped to $2,932,000 coming from $68,000 in the year 2012. In 2014, the net Income increased to $3,467,000. The proportionate income increase has been far greater than that in revenues, which reflects the increasing efficiency of the company and its improving ability to convert revenues to profits.
Despite an increase in the net income and revenues, the company’s ability to generate cash from its core business operations has decreased. Cash flow from operations in 2013, increased to $35,553,000 from $24,759,000 in 2012. However, in 2014, cash flows from operations decreased substantially to $1,131,000. Stakeholders are watching the company’s ability to make great profits. Meanwhile, the company is still making it their focus to generate more cash flow. Dividend and interest payments are taken out of cash. The decrease in cash from operations has primarily been due to debt payments by the company. The net decrease in total current liabilities during 2014 was $23,852,000. In the succeeding years, the cash flows from operations are expected to increase to normal. Total cash inflows during the period were -$12,899,000.
The Beta value of the company’s stock is 1.35. The Beta value is responsible for measuring the volatility of a company’s stock in relation with the swings in the market. A Beta value of more than 1 reflects that the stock is more volatile than the market. Stanley Morgan’s stock is 35% more volatile than the market. Any systematic risk associated with the company’s stock is still growing. Current stock price of the company is $37.19 and the earning per share in 2014 was $1.60 with the Price Earnings Ratio being 23.18. The 1-year target stock price of the company is $38, so the company’s stock prices are expected to hover around $35 to $40.
If we compare the financial performance of Morgan Stanley with its direct competitor Citigroup Global Markets Inc., the public are finding out that there exists great room for the company to improve performance in a big way. The opportunities are presenting themselves in a limitless way. Each economic condition is presenting a great opportunity for the company to increase its profitability and market performance. The growth of the company will depend then on its ability to avail itself of the opportunities that emerge in the future.
