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MS vs. TW: Which Stock Is the Better Value Option?

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Investors interested in Financial - Investment Bank stocks are likely familiar with Morgan Stanley (MS - Free Report) and Tradeweb Markets (TW - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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 Morgan Stanley and Tradeweb Markets 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. However, value investors will care about much more than just this.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

MS currently has a forward P/E ratio of 12.42, while TW has a forward P/E of 50.90. We also note that MS has a PEG ratio of 1.84. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TW currently has a PEG ratio of 3.84.

Another notable valuation metric for MS is its P/B ratio of 1.62. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TW has a P/B of 3.60.

These are just a few of the metrics contributing to MS's Value grade of B and TW's Value grade of F.

Both MS and TW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MS is the superior value option right now.


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