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

Analyst Ratings

This is a breakdown of current recommendations and price targets for Raymond James Financial and Morgan Stanley, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raymond James Financial 0 2 4 0 2.67
Morgan Stanley 1 7 15 1 2.67

Raymond James Financial currently has a consensus target price of $89.80, suggesting a potential upside of 8.31%. Morgan Stanley has a consensus target price of $48.40, suggesting a potential upside of 0.37%. Given Raymond James Financial’s higher probable upside, analysts plainly believe Raymond James Financial is more favorable than Morgan Stanley.

Risk & Volatility

Raymond James Financial has a beta of 1.66, meaning that its share price is 66% more volatile than the S&P 500. Comparatively, Morgan Stanley has a beta of 1.63, meaning that its share price is 63% more volatile than the S&P 500.

Profitability

This table compares Raymond James Financial and Morgan Stanley’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raymond James Financial 9.78% 13.37% 2.19%
Morgan Stanley 16.77% 9.83% 0.84%

Dividends

Raymond James Financial pays an annual dividend of $0.88 per share and has a dividend yield of 1.1%. Morgan Stanley pays an annual dividend of $1.00 per share and has a dividend yield of 2.1%. Raymond James Financial pays out 20.9% of its earnings in the form of a dividend. Morgan Stanley pays out 28.7% 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. Raymond James Financial has raised its dividend for 3 consecutive years and Morgan Stanley has raised 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.

Valuation and Earnings

This table compares Raymond James Financial and Morgan Stanley’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Raymond James Financial $6.12 billion 1.95 $605.03 million $4.21 19.69
Morgan Stanley $37.18 billion 2.38 $6.41 billion $3.49 13.82

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

Institutional & Insider Ownership

70.0% of Raymond James Financial shares are owned by institutional investors. Comparatively, 85.2% of Morgan Stanley shares are owned by institutional investors. 11.2% of Raymond James Financial shares are owned by company insiders. Comparatively, 0.4% of Morgan Stanley shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Morgan Stanley beats Raymond James Financial on 9 of the 17 factors compared between the two stocks.

Raymond James Financial Company Profile

Raymond James Financial, Inc. (RJF) is a financial holding company. The Company’s subsidiaries include Raymond James & Associates, Inc. (RJ&A), Raymond James Financial Services, Inc. (RJFS), Raymond James Financial Services Advisors, Inc. (RJFSA), Raymond James Ltd. (RJ Ltd.), Eagle Asset Management, Inc. (Eagle), and Raymond James Bank, N.A. (RJ Bank). It operates through five segments: Private Client Group (PCG), Capital Markets, Asset Management, RJ Bank and the Other segment. The Private Client Group segment includes the retail branches of the Company’s broker-dealer subsidiaries located throughout the United States, Canada and the United Kingdom. The Capital Markets segment includes institutional sales and trading in the United States, Canada and Europe. The Asset Management segment includes the operations of Eagle, the Eagle Family of Funds and other fee-based asset management programs. RJ Bank segment provides corporate loan, securities based loans (SB) and residential loans.

Morgan Stanley Company Profile

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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