GAIN Capital Holdings (NYSE: GCAP) and Morgan Stanley (NYSE:MS) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, analyst recommendations, earnings, dividends, risk, institutional ownership and valuation.

Volatility and Risk

GAIN Capital Holdings has a beta of 0.33, indicating that its stock price is 67% less volatile than the S&P 500. Comparatively, Morgan Stanley has a beta of 1.63, indicating that its stock price is 63% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for GAIN Capital Holdings and Morgan Stanley, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
GAIN Capital Holdings 0 1 1 0 2.50
Morgan Stanley 1 7 14 1 2.65

GAIN Capital Holdings presently has a consensus price target of $7.75, indicating a potential upside of 24.80%. Morgan Stanley has a consensus price target of $48.89, indicating a potential upside of 10.95%. Given GAIN Capital Holdings’ higher probable upside, research analysts clearly believe GAIN Capital Holdings is more favorable than Morgan Stanley.

Earnings & Valuation

This table compares GAIN Capital Holdings and Morgan Stanley’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
GAIN Capital Holdings $336.67 million 0.87 $10.87 million $0.23 27.00
Morgan Stanley $37.18 billion 2.18 $6.41 billion $3.49 12.63

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

Dividends

GAIN Capital Holdings pays an annual dividend of $0.24 per share and has a dividend yield of 3.9%. Morgan Stanley pays an annual dividend of $1.00 per share and has a dividend yield of 2.3%. GAIN Capital Holdings pays out 104.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Morgan Stanley pays out 28.7% of its earnings in the form of a dividend. Morgan Stanley has raised its dividend for 3 consecutive years.

Institutional & Insider Ownership

53.6% of GAIN Capital Holdings shares are owned by institutional investors. Comparatively, 85.2% of Morgan Stanley shares are owned by institutional investors. 5.0% of GAIN Capital Holdings shares are owned by insiders. Comparatively, 0.4% of Morgan Stanley shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares GAIN Capital Holdings and Morgan Stanley’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
GAIN Capital Holdings 3.21% 2.85% 0.56%
Morgan Stanley 16.77% 9.83% 0.84%

Summary

Morgan Stanley beats GAIN Capital Holdings on 14 of the 18 factors compared between the two stocks.

About GAIN Capital Holdings

GAIN Capital Holdings, Inc. (GAIN) is a provider of trading services and solutions, specializing in over-the-counter (OTC) and exchange-traded markets. The Company’s segments include Retail segment, Institutional segment and Futures segment. Through its retail segment, the Company provides its retail customers across the world with access to a range of global financial markets, including spot forex, precious metals, spread bets and contracts for difference (CFDs) on commodities, indices, individual equities and interest rate products, as well OTC options on forex. Its institutional segment provides agency execution services and offers electronic access to spot and forward foreign exchange and precious metals markets through Electronic Communications Network (ECN), through its GTX platform. Its futures segment offers execution and risk management services for exchange-traded futures and futures options on the United States and European exchanges.

About Morgan Stanley

Morgan Stanley is a financial holding company. The Company’s segments include Institutional Securities, Wealth Management and Investment Management. The Company’s Institutional Securities business segment provides investment banking, sales and trading, and other services to corporations, governments, financial institutions and high-to-ultra high net worth clients. The Company’s Wealth Management business segment provides an array of financial services and solutions to individual investors and small-to-medium sized businesses and institutions covering brokerage and investment advisory services, market-making activities in fixed income securities, financial and wealth planning services, annuity and insurance products, credit and other lending products, banking and retirement plan services. The Company’s Investment Management business segment provides a range of investment strategies and products.

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