Fundamentals Vs. Technicals at Morgan Stanley (NYSE:MS)

When making a decision to buy or sell a stock two things must be considered carefully, every time.  Both of these are very important, but to some people one may be more important than the other.  There is nothing wrong with putting emphasis on one or the other, but both of these must be reviewed every time buy or sell decisions are made; otherwise the decision will not be an educated decision.  The two factors that must be considered are fundamental analysis and technical analysis for the stock in question.  Both of these help us define value as well as future price action.

In this article we take a look at Morgan Stanley (NYSE:MS) to determine whether or not there is value in the stock at this time.  When looking at general earnings and revenue trends nothing seems impressive about the results as they were reported by the company.  However, our observations are a little different starting with the exclusion of onetime events.  Our effort is to focus on the earnings from operations because earnings from operations are what help us define value.

Furthermore, the raw data is interesting to observe, but it is the comparison of that data to previous periods that makes the most difference to us.  Specifically, we combine 12 months of data for every data point to determine trailing 12 month earnings for every quarter.  Using that data we compare this quarter (trailing 12) to the same quarter of last year to get yearly growth rates, and we compare this quarter to the previous quarter to get quarterly growth rates.  Those observations are much more important to us than the raw data supplied by the company or the adjusted data we use that excludes the onetime events.

When we compare trailing 12 month earnings numbers the result we get shows us the growth rate that the company has been realizing.  This growth rate can be used to measure against the PE multiple to determine value, and that is exactly what we're doing to determine value in Morgan Stanley.

According to our observations, Morgan Stanley has recently been growing Earnings at about 13.5% on a yearly growth basis.  In addition, the PE and ratio for Morgan Stanley is 14.95 times earnings, making its current peg ratio 1.1.  If Morgan Stanley is capable of maintaining the earnings growth it has demonstrated recently Morgan Stanley absolutely will be a value proposition at these levels.

Morgan Stanley MS EPS Growth

Morgan Stanley MS PEG ratio

The main concern is that earnings growth has been declining, so if the company fails to maintain its earnings growth rate going forward this value proposition will change. 

Immediately, Morgan Stanley looks interesting, but all that really matters to investors and traders who are interested in making money is price, so we must now observe Morgan Stanley's price action using our technical analysis.  In doing so we can see that Morgan Stanley is testing a level

Of longer-term resistance and if that longer-term resistance level remains intact the stock is likely to fall all the way down to longer term support as we have defined that in our real time trading report for MS.  Buy signals will surface technically if resistance breaks higher, so if resistance breaks higher the value proposition will be supported, but resistance is inflection and the ability or the inability of the stock to hold resistance will tell us if the stock is going to fall back to support or continue to increase and make higher highs.  By rule, we should expect resistance levels to hold unless they break.