Intrinsic value of Morgan Stanley - MS

Previous Close

$50.68

  Intrinsic Value

$137.81

stock screener

  Rating & Target

str. buy

+172%

  Value-price divergence*

-99%

Previous close

$50.68

 
Intrinsic value

$137.81

 
Up/down potential

+172%

 
Rating

str. buy

 
Value-price divergence*

-99%

Our model is not good at valuating stocks of financial companies, such as MS.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 93.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.14
  12.40
  11.66
  10.99
  10.39
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
Revenue, $m
  37,949
  42,655
  47,628
  52,864
  58,360
  64,111
  70,118
  76,381
  82,904
  89,690
  96,746
  104,079
  111,700
  119,620
  127,851
  136,407
  145,306
  154,564
  164,200
  174,233
  184,687
  195,583
  206,945
  218,801
  231,176
  244,099
  257,601
  271,713
  286,467
  301,900
  318,047
Variable operating expenses, $m
 
  33,018
  36,792
  40,764
  44,933
  49,297
  53,854
  58,606
  63,554
  68,703
  74,056
  78,962
  84,743
  90,752
  96,996
  103,488
  110,239
  117,263
  124,573
  132,185
  140,116
  148,382
  157,003
  165,997
  175,386
  185,190
  195,434
  206,140
  217,334
  229,042
  241,293
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  29,101
  33,018
  36,792
  40,764
  44,933
  49,297
  53,854
  58,606
  63,554
  68,703
  74,056
  78,962
  84,743
  90,752
  96,996
  103,488
  110,239
  117,263
  124,573
  132,185
  140,116
  148,382
  157,003
  165,997
  175,386
  185,190
  195,434
  206,140
  217,334
  229,042
  241,293
Operating income, $m
  8,848
  9,636
  10,836
  12,100
  13,426
  14,814
  16,264
  17,775
  19,350
  20,987
  22,690
  25,118
  26,957
  28,868
  30,854
  32,919
  35,067
  37,301
  39,626
  42,048
  44,571
  47,200
  49,942
  52,803
  55,790
  58,909
  62,167
  65,573
  69,133
  72,858
  76,755
EBITDA, $m
  10,584
  11,223
  12,532
  13,909
  15,355
  16,868
  18,449
  20,097
  21,813
  23,598
  25,455
  27,384
  29,390
  31,473
  33,639
  35,890
  38,232
  40,668
  43,203
  45,843
  48,593
  51,460
  54,450
  57,569
  60,825
  64,225
  67,778
  71,491
  75,373
  79,434
  83,682
Interest expense (income), $m
  2,834
  12,786
  15,687
  18,951
  22,387
  25,993
  29,768
  33,710
  37,820
  42,101
  46,554
  51,184
  55,997
  60,998
  66,195
  71,597
  77,212
  83,052
  89,127
  95,451
  102,036
  108,896
  116,046
  123,503
  131,283
  139,404
  147,885
  156,745
  166,006
  175,689
  185,817
Earnings before tax, $m
  8,848
  -3,150
  -4,851
  -6,851
  -8,961
  -11,179
  -13,504
  -15,934
  -18,471
  -21,113
  -23,864
  -26,067
  -29,040
  -32,130
  -35,341
  -38,677
  -42,145
  -45,751
  -49,501
  -53,403
  -57,465
  -61,695
  -66,104
  -70,699
  -75,493
  -80,495
  -85,718
  -91,173
  -96,873
  -102,831
  -109,062
Tax expense, $m
  2,726
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  5,979
  -3,150
  -4,851
  -6,851
  -8,961
  -11,179
  -13,504
  -15,934
  -18,471
  -21,113
  -23,864
  -26,067
  -29,040
  -32,130
  -35,341
  -38,677
  -42,145
  -45,751
  -49,501
  -53,403
  -57,465
  -61,695
  -66,104
  -70,699
  -75,493
  -80,495
  -85,718
  -91,173
  -96,873
  -102,831
  -109,062

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  22,017
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  814,949
  888,639
  992,254
  1,101,343
  1,215,823
  1,335,644
  1,460,789
  1,591,276
  1,727,162
  1,868,538
  2,015,534
  2,168,316
  2,327,084
  2,492,074
  2,663,553
  2,841,822
  3,027,211
  3,220,081
  3,420,825
  3,629,861
  3,847,639
  4,074,637
  4,311,362
  4,558,348
  4,816,162
  5,085,398
  5,366,684
  5,660,677
  5,968,069
  6,289,586
  6,625,988
Adjusted assets (=assets-cash), $m
  792,932
  888,639
  992,254
  1,101,343
  1,215,823
  1,335,644
  1,460,789
  1,591,276
  1,727,162
  1,868,538
  2,015,534
  2,168,316
  2,327,084
  2,492,074
  2,663,553
  2,841,822
  3,027,211
  3,220,081
  3,420,825
  3,629,861
  3,847,639
  4,074,637
  4,311,362
  4,558,348
  4,816,162
  5,085,398
  5,366,684
  5,660,677
  5,968,069
  6,289,586
  6,625,988
Revenue / Adjusted assets
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
Average production assets, $m
  6,039
  6,782
  7,573
  8,405
  9,279
  10,194
  11,149
  12,145
  13,182
  14,261
  15,383
  16,549
  17,760
  19,020
  20,328
  21,689
  23,104
  24,576
  26,108
  27,703
  29,365
  31,098
  32,904
  34,789
  36,757
  38,812
  40,959
  43,202
  45,548
  48,002
  50,570
Working capital, $m
  0
  21,327
  23,814
  26,432
  29,180
  32,055
  35,059
  38,191
  41,452
  44,845
  48,373
  52,040
  55,850
  59,810
  63,925
  68,204
  72,653
  77,282
  82,100
  87,117
  92,343
  97,791
  103,473
  109,400
  115,588
  122,050
  128,800
  135,856
  143,234
  150,950
  159,024
Total debt, $m
  387,325
  448,201
  541,455
  639,635
  742,667
  850,506
  963,136
  1,080,575
  1,202,872
  1,330,110
  1,462,407
  1,599,910
  1,742,802
  1,891,293
  2,045,624
  2,206,066
  2,372,916
  2,546,499
  2,727,168
  2,915,301
  3,111,301
  3,315,600
  3,528,651
  3,750,939
  3,982,971
  4,225,284
  4,478,441
  4,743,036
  5,019,689
  5,309,053
  5,611,815
Total liabilities, $m
  738,899
  799,775
  893,029
  991,209
  1,094,241
  1,202,080
  1,314,710
  1,432,149
  1,554,446
  1,681,684
  1,813,981
  1,951,484
  2,094,376
  2,242,867
  2,397,198
  2,557,640
  2,724,490
  2,898,073
  3,078,742
  3,266,875
  3,462,875
  3,667,174
  3,880,225
  4,102,513
  4,334,545
  4,576,858
  4,830,015
  5,094,610
  5,371,263
  5,660,627
  5,963,389
Total equity, $m
  76,050
  88,864
  99,225
  110,134
  121,582
  133,564
  146,079
  159,128
  172,716
  186,854
  201,553
  216,832
  232,708
  249,207
  266,355
  284,182
  302,721
  322,008
  342,082
  362,986
  384,764
  407,464
  431,136
  455,835
  481,616
  508,540
  536,668
  566,068
  596,807
  628,959
  662,599
Total liabilities and equity, $m
  814,949
  888,639
  992,254
  1,101,343
  1,215,823
  1,335,644
  1,460,789
  1,591,277
  1,727,162
  1,868,538
  2,015,534
  2,168,316
  2,327,084
  2,492,074
  2,663,553
  2,841,822
  3,027,211
  3,220,081
  3,420,824
  3,629,861
  3,847,639
  4,074,638
  4,311,361
  4,558,348
  4,816,161
  5,085,398
  5,366,683
  5,660,678
  5,968,070
  6,289,586
  6,625,988
Debt-to-equity ratio
  5.093
  5.040
  5.460
  5.810
  6.110
  6.370
  6.590
  6.790
  6.960
  7.120
  7.260
  7.380
  7.490
  7.590
  7.680
  7.760
  7.840
  7.910
  7.970
  8.030
  8.090
  8.140
  8.180
  8.230
  8.270
  8.310
  8.340
  8.380
  8.410
  8.440
  8.470
Adjusted equity ratio
  0.096
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,979
  -3,150
  -4,851
  -6,851
  -8,961
  -11,179
  -13,504
  -15,934
  -18,471
  -21,113
  -23,864
  -26,067
  -29,040
  -32,130
  -35,341
  -38,677
  -42,145
  -45,751
  -49,501
  -53,403
  -57,465
  -61,695
  -66,104
  -70,699
  -75,493
  -80,495
  -85,718
  -91,173
  -96,873
  -102,831
  -109,062
Depreciation, amort., depletion, $m
  1,736
  1,587
  1,695
  1,809
  1,929
  2,054
  2,185
  2,321
  2,463
  2,611
  2,765
  2,267
  2,433
  2,605
  2,785
  2,971
  3,165
  3,367
  3,576
  3,795
  4,023
  4,260
  4,507
  4,766
  5,035
  5,317
  5,611
  5,918
  6,239
  6,576
  6,927
Funds from operations, $m
  -5,921
  -1,563
  -3,155
  -5,042
  -7,032
  -9,125
  -11,319
  -13,613
  -16,007
  -18,502
  -21,099
  -23,800
  -26,607
  -29,525
  -32,556
  -35,706
  -38,981
  -42,384
  -45,925
  -49,608
  -53,442
  -57,435
  -61,596
  -65,934
  -70,458
  -75,179
  -80,107
  -85,255
  -90,633
  -96,256
  -102,135
Change in working capital, $m
  -8,368
  2,353
  2,487
  2,618
  2,748
  2,876
  3,003
  3,132
  3,261
  3,393
  3,528
  3,667
  3,810
  3,960
  4,115
  4,278
  4,449
  4,629
  4,818
  5,017
  5,227
  5,448
  5,681
  5,928
  6,188
  6,462
  6,751
  7,056
  7,377
  7,716
  8,074
Cash from operations, $m
  2,447
  -3,916
  -5,642
  -7,660
  -9,780
  -12,001
  -14,322
  -16,745
  -19,268
  -21,895
  -24,627
  -27,467
  -30,418
  -33,484
  -36,672
  -39,985
  -43,430
  -47,013
  -50,742
  -54,625
  -58,669
  -62,883
  -67,278
  -71,861
  -76,645
  -81,640
  -86,858
  -92,310
  -98,011
  -103,972
  -110,208
Maintenance CAPEX, $m
  0
  -827
  -929
  -1,037
  -1,151
  -1,271
  -1,396
  -1,527
  -1,664
  -1,806
  -1,954
  -2,107
  -2,267
  -2,433
  -2,605
  -2,785
  -2,971
  -3,165
  -3,367
  -3,576
  -3,795
  -4,023
  -4,260
  -4,507
  -4,766
  -5,035
  -5,317
  -5,611
  -5,918
  -6,239
  -6,576
New CAPEX, $m
  -1,276
  -743
  -791
  -833
  -874
  -914
  -955
  -996
  -1,037
  -1,079
  -1,122
  -1,166
  -1,212
  -1,259
  -1,309
  -1,361
  -1,415
  -1,472
  -1,532
  -1,595
  -1,662
  -1,732
  -1,807
  -1,885
  -1,968
  -2,055
  -2,147
  -2,244
  -2,346
  -2,454
  -2,567
Cash from investing activities, $m
  -19,508
  -1,570
  -1,720
  -1,870
  -2,025
  -2,185
  -2,351
  -2,523
  -2,701
  -2,885
  -3,076
  -3,273
  -3,479
  -3,692
  -3,914
  -4,146
  -4,386
  -4,637
  -4,899
  -5,171
  -5,457
  -5,755
  -6,067
  -6,392
  -6,734
  -7,090
  -7,464
  -7,855
  -8,264
  -8,693
  -9,143
Free cash flow, $m
  -17,061
  -5,486
  -7,362
  -9,530
  -11,805
  -14,186
  -16,674
  -19,268
  -21,969
  -24,780
  -27,702
  -30,740
  -33,896
  -37,177
  -40,586
  -44,130
  -47,816
  -51,650
  -55,641
  -59,797
  -64,126
  -68,638
  -73,344
  -78,254
  -83,379
  -88,730
  -94,321
  -100,165
  -106,275
  -112,665
  -119,351
Issuance/(repayment) of debt, $m
  12,030
  82,893
  93,254
  98,180
  103,032
  107,839
  112,630
  117,439
  122,297
  127,238
  132,297
  137,504
  142,892
  148,491
  154,331
  160,442
  166,850
  173,584
  180,669
  188,133
  196,000
  204,298
  213,052
  222,288
  232,032
  242,313
  253,157
  264,594
  276,653
  289,365
  302,761
Issuance/(repurchase) of shares, $m
  -3,933
  15,963
  15,212
  17,760
  20,409
  23,161
  26,018
  28,983
  32,059
  35,251
  38,563
  41,345
  44,917
  48,629
  52,489
  56,504
  60,684
  65,038
  69,575
  74,307
  79,243
  84,395
  89,776
  95,398
  101,274
  107,419
  113,846
  120,572
  127,612
  134,983
  142,702
Cash from financing (excl. dividends), $m  
  9,170
  98,856
  108,466
  115,940
  123,441
  131,000
  138,648
  146,422
  154,356
  162,489
  170,860
  178,849
  187,809
  197,120
  206,820
  216,946
  227,534
  238,622
  250,244
  262,440
  275,243
  288,693
  302,828
  317,686
  333,306
  349,732
  367,003
  385,166
  404,265
  424,348
  445,463
Total cash flow (excl. dividends), $m
  -8,956
  93,371
  101,104
  106,410
  111,636
  116,814
  121,975
  127,154
  132,387
  137,710
  143,158
  148,109
  153,912
  159,943
  166,234
  172,816
  179,719
  186,971
  194,603
  202,643
  211,117
  220,055
  229,484
  239,432
  249,928
  261,002
  272,682
  285,001
  297,990
  311,682
  326,112
Retained Cash Flow (-), $m
  -868
  -15,963
  -15,212
  -17,760
  -20,409
  -23,161
  -26,018
  -28,983
  -32,059
  -35,251
  -38,563
  -41,345
  -44,917
  -48,629
  -52,489
  -56,504
  -60,684
  -65,038
  -69,575
  -74,307
  -79,243
  -84,395
  -89,776
  -95,398
  -101,274
  -107,419
  -113,846
  -120,572
  -127,612
  -134,983
  -142,702
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  77,407
  85,892
  88,650
  91,227
  93,653
  95,957
  98,171
  100,328
  102,459
  104,594
  106,764
  108,995
  111,314
  113,745
  116,312
  119,034
  121,933
  125,028
  128,336
  131,874
  135,660
  139,708
  144,034
  148,654
  153,583
  158,836
  164,429
  170,378
  176,700
  183,410
Discount rate, %
 
  12.80
  13.44
  14.11
  14.82
  15.56
  16.34
  17.15
  18.01
  18.91
  19.86
  20.85
  21.89
  22.99
  24.14
  25.34
  26.61
  27.94
  29.34
  30.80
  32.34
  33.96
  35.66
  37.44
  39.32
  41.28
  43.35
  45.51
  47.79
  50.18
  52.69
PV of cash for distribution, $m
 
  68,623
  66,745
  59,660
  52,492
  45,448
  38,706
  32,412
  26,671
  21,554
  17,095
  13,296
  10,132
  7,558
  5,513
  3,927
  2,730
  1,849
  1,219
  781
  485
  292
  170
  96
  52
  27
  14
  7
  3
  1
  1
Current shareholders' claim on cash, %
  100
  85.3
  74.9
  65.3
  56.7
  49.1
  42.3
  36.4
  31.3
  26.8
  22.9
  19.6
  16.8
  14.3
  12.2
  10.4
  8.9
  7.5
  6.4
  5.4
  4.6
  3.9
  3.3
  2.8
  2.4
  2.0
  1.7
  1.4
  1.2
  1.0
  0.9

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.

FINANCIAL RATIOS  of  Morgan Stanley (MS)

Valuation Ratios
P/E Ratio 15.7
Price to Sales 2.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 38.4
Price to Free Cash Flow 80.2
Growth Rates
Sales Growth Rate 0.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.1%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 231.3%
Total Debt to Equity 509.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 1%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.2%
Return On Equity 7.9%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 80.6%
Gross Margin - 3 Yr. Avg. 80.8%
EBITDA Margin 35.4%
EBITDA Margin - 3 Yr. Avg. 30.2%
Operating Margin 23.3%
Oper. Margin - 3 Yr. Avg. 18.4%
Pre-Tax Margin 23.3%
Pre-Tax Margin - 3 Yr. Avg. 18.4%
Net Profit Margin 15.8%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 18.1%
Payout Ratio 29.2%

MS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MS stock intrinsic value calculation we used $37949 million for the last fiscal year's total revenue generated by Morgan Stanley. The default revenue input number comes from 2016 income statement of Morgan Stanley. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MS stock valuation model: a) initial revenue growth rate of 12.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.8%, whose default value for MS is calculated based on our internal credit rating of Morgan Stanley, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Morgan Stanley.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MS stock the variable cost ratio is equal to 77.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Morgan Stanley.

Corporate tax rate of 27% is the nominal tax rate for Morgan Stanley. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MS are equal to 15.9%.

Life of production assets of 7.3 years is the average useful life of capital assets used in Morgan Stanley operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MS is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $76050 million for Morgan Stanley - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1834.13 million for Morgan Stanley is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Morgan Stanley at the current share price and the inputted number of shares is $93.0 billion.

RELATED COMPANIES Price Int.Val. Rating
GS Goldman Sachs 244.73 416.51  str.buy
SCHW Charles Schwab 44.68 97.33  str.buy
EVR Evercore Partn 78.55 137.98  str.buy
RJF Raymond James 86.63 472.69  str.buy

COMPANY NEWS

▶ [$$] Morgan Stanley: Wall Street's Top Firm   [Oct-21-17 12:01AM  Barrons.com]
▶ How FANG Stocks Lost Their Bite   [Oct-20-17 11:39AM  Bloomberg Video]
▶ [$$] Machines Took Over the Stock Market. Next Up, Bonds   [12:01AM  The Wall Street Journal]
▶ [$$] Machines Took Over The Stock Market. Next Up, Bonds   [11:41AM  The Wall Street Journal]
▶ Morgan Stanley Is 'Open for Business'   [11:22AM  Barrons.com]
▶ Company News For Oct 18, 2017   [10:49AM  Zacks]
▶ What You Need to Know About U.S. Bank Earnings   [02:40AM  Bloomberg Video]
▶ [$$] Why Its Time to Get Back into Goldman   [12:04AM  The Wall Street Journal]
▶ [$$] Morgan Stanley Thrives   [Oct-17-17 08:46PM  The Wall Street Journal]
▶ Cramer offers 5 cheap stocks   [06:56PM  CNBC Videos]
▶ [$$] Goldman/Morgan: an acid test awaits   [03:11PM  Financial Times]
▶ [$$] Why It's Time to Get Back into Goldman   [10:57AM  The Wall Street Journal]
▶ Goldman, Morgan Stanley crush targets   [10:31AM  Reuters Videos]
▶ It's Morgan Stanley for the Win   [09:09AM  Bloomberg]
▶ Morgan Stanley Reports Third Quarter 2017   [06:55AM  Business Wire]
▶ Morgan Stanley to Post 3rd-Quarter Figures   [12:20PM  GuruFocus.com]
▶ [$$] 5 Things to Watch in Morgan Stanley's Results   [12:19PM  The Wall Street Journal]
▶ Las Vegas tourism sees changes in aftermath of shooting   [Oct-15-17 03:30PM  Associated Press]
▶ How to trade the banks post-earnings   [12:19PM  CNBC Videos]
▶ Bitcoin Is Now Bigger Than Goldman Sachs   [11:52AM  Investopedia]
▶ Bitcoin boom continues   [10:29AM  Yahoo Finance Video]
▶ Banks taking a breather: CFRA's Ken Leon   [03:51PM  CNBC Videos]
▶ Shalett Says It's Too Early to Go to Cash   [06:41AM  Bloomberg Video]
▶ Big-Bank Boogaloo: Buy Morgan Stanley, Skip Goldman   [Oct-09-17 10:58AM  Barrons.com]
▶ [$$] Derek Jeter's Banker Joins Rockefellers in New Wall Street Venture   [Oct-04-17 10:30PM  The Wall Street Journal]
Financial statements of MS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.