3 Reasons to Sell MS and 1 Stock to Buy Instead

September 09, 2025 at 00:02 AM EDT

MS Cover Image

Since September 2020, the S&P 500 has delivered a total return of 91%. But one standout stock has more than doubled the market - over the past five years, Morgan Stanley has surged 192% to $148.85 per share. Its momentum hasn’t stopped as it’s also gained 33.3% in the last six months thanks to its solid quarterly results, beating the S&P by 17.5%.

Is there a buying opportunity in Morgan Stanley, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Morgan Stanley Not Exciting?

We’re glad investors have benefited from the price increase, but we're swiping left on Morgan Stanley for now. Here are three reasons you should be careful with MS and a stock we'd rather own.

1. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Morgan Stanley’s unimpressive 9.2% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Morgan Stanley Trailing 12-Month EPS (Non-GAAP)

2. TBVPS Growth Demonstrates Strong Asset Foundation

Tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.

Although Morgan Stanley’s TBVPS increased by a meager 1.6% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at a decent 7.6% annual clip over the past two years (from $40.79 to $47.25 per share).

Morgan Stanley Quarterly Tangible Book Value per Share

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Morgan Stanley Quarterly Debt-to-Equity Ratio

Morgan Stanley currently has $576.6 billion of debt and $108.2 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 5×. We think this is dangerous - for a financials business, anything above 3.5× raises red flags.

Final Judgment

Morgan Stanley’s business quality ultimately falls short of our standards. With its shares topping the market in recent months, the stock trades at 16.6× forward P/E (or $148.85 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.

Stocks We Like More Than Morgan Stanley

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

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