Comparing Exxon Mobil Corporation (XOM) and Morgan Stanley (MS)

Exxon Mobil Corporation (NYSE:XOM) shares are down more than -2.10% this year and recently decreased -0.17% or -$0.14 to settle at $81.88. Morgan Stanley (NYSE:MS), on the other hand, is up 4.57% year to date as of 05/17/2018. It currently trades at $54.87 and has returned -0.31% during the past week.

Exxon Mobil Corporation (NYSE:XOM) and Morgan Stanley (NYSE:MS) are the two most active stocks in the Major Integrated Oil & Gas industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.


Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect XOM to grow earnings at a 17.95% annual rate over the next 5 years. Comparatively, MS is expected to grow at a 17.74% annual rate. All else equal, XOM’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 48.66% for Morgan Stanley (MS). XOM’s ROI is 3.20% while MS has a ROI of 1.50%. The interpretation is that XOM’s business generates a higher return on investment than MS’s.

Cash Flow

The amount of free cash flow available to investors is ultimately what determines the value of a stock. XOM’s free cash flow (“FCF”) per share for the trailing twelve months was +0.44. Comparatively, MS’s free cash flow per share was -5.36. On a percent-of-sales basis, XOM’s free cash flow was 0.76% while MS converted -25.01% of its revenues into cash flow. This means that, for a given level of sales, XOM is able to generate more free cash flow for investors.

Liquidity and Financial Risk

XOM’s debt-to-equity ratio is 0.22 versus a D/E of 5.85 for MS. MS is therefore the more solvent of the two companies, and has lower financial risk.


XOM trades at a forward P/E of 16.62, a P/B of 1.86, and a P/S of 1.45, compared to a forward P/E of 10.73, a P/B of 1.37, and a P/S of 2.09 for MS. XOM is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. XOM is currently priced at a -4.18% to its one-year price target of 85.45. Comparatively, MS is -11.26% relative to its price target of 61.83. This suggests that MS is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. XOM has a beta of 0.92 and MS’s beta is 1.52. XOM’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. XOM has a short ratio of 1.94 compared to a short interest of 1.19 for MS. This implies that the market is currently less bearish on the outlook for MS.


Exxon Mobil Corporation (NYSE:XOM) beats Morgan Stanley (NYSE:MS) on a total of 8 of the 14 factors compared between the two stocks. XOM is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, SAN has better sentiment signals based on short interest.

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