Which Is a Better Investment, Morgan Stanley or Charles Schwab Corp Stock? (2024)

Sifting through countless of stocks in the Investment Banking & Brokerage Services industry can be tedious, and sometimes two stocks are just too similar to judge which is the better investment. If you’re on the fence about investing in Charles Schwab Corp or Morgan Stanley because you’re not sure how they measure up, it’s important to compare them on a few factors before making your decision.

Read on to learn how Charles Schwab Corp and Morgan Stanley compare based on key financial metrics to determine which better meets your investment needs.

The Charles Schwab Corporation is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, and retirement business services, to independent registered investment advisors, independent retirement advisors, and recordkeepers. Its products and services include brokerage, mutual funds, exchange-traded funds, advice solutions, alternative investments, banking and trust.

Morgan Stanley is a global financial services company. The Company, through its subsidiaries, provides a range of investment banking, securities, wealth management and investment management services. Its segments include Institutional Securities, Wealth Management and Investment Management. Its Institutional Securities segment provides investment banking, equity and fixed income, and lending activities to corporations, governments, financial institutions and high net worth clients. Its Wealth Management segment provides financial services and solutions to individual investors and small-to-medium sized businesses and institutions covering: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; residential real estate loans and other lending products; banking; and retirement plan services. Its Investment Management segment provides a range of investment strategies and products.

As of April 8, 2024, Charles Schwab Corp had a $131.2 billion market capitalization, compared to the Investment Banking & Brokerage Services median of $4.0 million. Charles Schwab Corp’s stock is NA in 2024, NA in the previous five trading days and up 48.09% in the past year.

Currently, Charles Schwab Corp’s price-earnings ratio is 28.3. Charles Schwab Corp’s trailing 12-month revenue is $25.5 billion with a 18.2% net profit margin. Year-over-year quarterly sales growth most recently was -0.3%. Analysts expect adjusted earnings to reach $3.390 per share for the current fiscal year. Charles Schwab Corp currently has a 1.4% dividend yield.

Currently, Morgan Stanley’s price-earnings ratio is 18.0. Morgan Stanley’s trailing 12-month revenue is $96.2 billion with a 8.9% net profit margin. Year-over-year quarterly sales growth most recently was 27.4%. Analysts expect adjusted earnings to reach $6.404 per share for the current fiscal year. Morgan Stanley currently has a 3.6% dividend yield.

Stock evaluation requires access to huge amounts of data and the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movements. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors streamline and work through such data.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A‐F grades for each of five key investing factors: value, growth, momentum, earnings estimate revisions and quality. Here, we’ll take a closer look at Charles Schwab Corp and Morgan Stanley’s stock grades to see how they measure up against one another.

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Like the Value Grade, AAII’s A+ Investor Quality Grade comes from the percentile rank of key metrics. Specifically, the Quality Score is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit relative to assets, buyback yield, change in total liabilities to assets, accruals, Z double prime bankruptcy risk (Z) score and the F-Score.

The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the remaining measures that are valid. To be assigned a Quality Score, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.

The Quality Score is used to assess the underlying “quality” of a particular stock. A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades over the period of 1998 through 2019.

Stocks receive better grades (higher scores) for having higher scores for the quality subcomponents and worse grades (lower scores) for lower scores for the subcomponents.

Charles Schwab Corp has a Quality Score of 68, which is Strong. Morgan Stanley has a Quality Score of 24, which is Weak.

Momentum grades help to uncover stocks experiencing anomalously high rates of return; research finds that stocks with high relative levels of momentum tend to outperform, whereas those with low levels of momentum tend to continue underperforming. Momentum is based on the price change of a stock over a specified period relative to all other stocks.

Typically, AAII looks at the weighted relative strength over the trailing four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters. The most recent quarterly price change is given a weight of 40% and each of the three previous quarters are given a weighting of 20%.

Charles Schwab Corp has a Momentum Score of 75, which is Strong. Morgan Stanley has a Momentum Score of 53, which is Average.

Earnings estimate revisions scores consider the magnitude of a company’s earnings surprise in its last two reported fiscal quarters. Often, positive surprises beget further positive surprises‐or at least continued sales growth (the exact opposite is generally true, too).

Estimate revisions offer an indication of what analysts are thinking about the short-term prospects of a firm. Estimate revisions are based on the statistical significance of a firm’s last two quarterly earnings surprises and the percentage change in its consensus estimate for the current fiscal year over the past month and past three months.

Charles Schwab Corp has a Earnings Estimate Score of 51, which is Neutral. Morgan Stanley has a Earnings Estimate Score of 27, which is Negative.

Growth investing builds on the idea that stocks of companies exhibiting strong, consistent and prolonged growth outperform those of slower-growth companies. AAII measures growth through consistency of annual sales growth, five-year sales growth rankings adjusted for extreme levels, and consistency of positive annual cash from operations.

Successful stock investing involves buying low and selling high, so stock valuation is an important consideration for stock selection. Buying stocks that are going to go up typically means buying stocks that are undervalued in the first place, although momentum investors may argue that point.

These 2 key factors, when combined with the above, provide a holistic view into a particular stock. Further, by joining A+ Investor you can see whether Charles Schwab Corp and Morgan Stanley pass any of our 60+ stock screens that have outperformed the market since their creation.

Overall, Charles Schwab Corp stock has a Momentum Score of 75, Estimate Revisions Score of 51 and Quality Score of 68.

Morgan Stanley stock has a Momentum Score of 53, Estimate Revisions Score of 27 and Quality Score of 24.

Comparing Charles Schwab Corp and Morgan Stanley’s grades, scores and metrics can act as a solid basis to determine whether they may be a good investment or not. You’ll also want to look at your portfolio’s asset allocation as well as your risk tolerance and financial goals to see if either of these stocks would make a good fit for you. AAII can help you figure out which investments align with your individual needs and preferences.

Investors are encouraged to do their own due diligence and research. In this way, individuals can effectively become managers of their own assets‐without having to rely on others for financial independence. You can count on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis.

A+ Investor adds to our qualitative teaching with a powerful data suite to help you whittle down investment choices to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.