Financial Contrast: TD Ameritrade (AMTD) & Morgan Stanley (MS)

TD Ameritrade (NASDAQ: AMTD) and Morgan Stanley (NYSE:MS) are both large-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares TD Ameritrade and Morgan Stanley’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TD Ameritrade 22.02% 19.66% 3.72%
Morgan Stanley 15.09% 11.10% 0.93%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for TD Ameritrade and Morgan Stanley, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TD Ameritrade 1 4 12 0 2.65
Morgan Stanley 2 6 12 1 2.57

TD Ameritrade presently has a consensus target price of $63.56, indicating a potential upside of 4.73%. Morgan Stanley has a consensus target price of $56.06, indicating a potential upside of 3.96%. Given TD Ameritrade’s stronger consensus rating and higher probable upside, equities research analysts clearly believe TD Ameritrade is more favorable than Morgan Stanley.

Earnings and Valuation

This table compares TD Ameritrade and Morgan Stanley’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TD Ameritrade $3.68 billion 9.37 $872.00 million $1.84 32.98
Morgan Stanley $43.64 billion 2.19 $6.11 billion $3.60 14.98

Morgan Stanley has higher revenue and earnings than TD Ameritrade. Morgan Stanley is trading at a lower price-to-earnings ratio than TD Ameritrade, indicating that it is currently the more affordable of the two stocks.

Dividends

TD Ameritrade pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. Morgan Stanley pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. TD Ameritrade pays out 45.7% of its earnings in the form of a dividend. Morgan Stanley pays out 27.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Morgan Stanley has increased its dividend for 4 consecutive years. Morgan Stanley is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

93.1% of TD Ameritrade shares are held by institutional investors. Comparatively, 87.0% of Morgan Stanley shares are held by institutional investors. 0.4% of TD Ameritrade shares are held by insiders. Comparatively, 0.2% of Morgan Stanley shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

TD Ameritrade has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500. Comparatively, Morgan Stanley has a beta of 1.55, meaning that its share price is 55% more volatile than the S&P 500.

Summary

TD Ameritrade beats Morgan Stanley on 9 of the 17 factors compared between the two stocks.

About TD Ameritrade

TD Ameritrade Holding Corporation provides securities brokerage and related technology-based financial services to retail investors, traders, and independent registered investment advisors (RIAs) in the United States. Its products and services include tdameritrade.com, a Web platform for self-directed retail investors; Trade Architect, a Web-based platform for investors and traders to identify opportunities and stay informed; thinkorswim, a desktop platform for traders; and TD Ameritrade Mobile, which allows on-the-go investors and traders to trade and monitor accounts. The company also offers TD Ameritrade Institutional that provides brokerage and custody services to approximately 6,000 independent RIAs and their clients; TD Ameritrade Education, which allows investor education for stocks, options, income investing, and portfolio management; TD Ameritrade's Goal Planning that offers investment consulting and planning services; Selective Portfolios, an advisory service, which develops portfolios of exchange-traded funds (ETFs) and mutual funds; AdvisorDirect, a national referral service for investors; TD Ameritrade Singapore Pte. Ltd. that enables retail investors in Singapore to trade the U.S. markets; and TD Ameritrade Corporate Services, which provide self-directed brokerage services to employees of corporations. In addition, it offers various retail brokerage products and services, such as common and preferred stocks; ETFs; options; futures; foreign exchange; mutual funds; fixed income products; primary and secondary offerings of fixed income securities, closed-end funds, and preferred stocks; margin lending; cash management services; and annuities. The company provides its services primarily through the Internet, a network of retail branches, mobile trading applications, interactive voice response, and registered representatives through telephone. TD Ameritrade Holding Corporation was founded in 1971 and is headquartered in Omaha, Nebraska.

About Morgan Stanley

Morgan Stanley, a financial holding company, provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa, and Asia. The company operates through three segments: Institutional Securities, Wealth Management, and Investment Management. The Institutional Securities segment offers capital raising and financial advisory services, including services related to the underwriting of debt, equity, and other securities, as well as advice on mergers and acquisitions, restructurings, real estate, and project finance. This segment also provides sales and trading services, such as sales, financing, and market-making services in equity securities and fixed income products consisting of foreign exchange and commodities, as well as prime brokerage services; corporate loans, commercial and residential mortgage lending, and asset-backed lending; financing for equities and commodities customers; loans to municipalities; and investment and research services. The Wealth Management segment offers various financial services and solutions covering brokerage and investment advisory services, financial and wealth planning services, annuity and insurance products, credit and other lending products, and banking and retirement plan services to individual investors and small to medium-sized businesses/institutions. The Investment Management segment provides various investment strategies and products comprising equity, fixed income, liquidity, and alternative/other products to defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, and third-party fund sponsors and corporations through a network of institutional and intermediary channels. Morgan Stanley was founded in 1924 and is headquartered in New York, New York.

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