Investors with an interest in Financial - Investment Bank stocks have likely encountered both Goldman Sachs (GS) and Morgan Stanley (MS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, both Goldman Sachs and Morgan Stanley are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GS currently has a forward P/E ratio of 16.88, while MS has a forward P/E of 17.64. We also note that GS has a PEG ratio of 1.64. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MS currently has a PEG ratio of 1.94.
Another notable valuation metric for GS is its P/B ratio of 2.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MS has a P/B of 2.52.
These are just a few of the metrics contributing to GS's Value grade of B and MS's Value grade of D.
Both GS and MS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GS is the superior value option right now.
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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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