Goldman vs. Morgan Stanley: Which Financial Giant Has More Upside?

When it comes to Wall Street's most prominent investment banks, Goldman Sachs GS and Morgan Stanley MS are consistently at the forefront. Both firms are well-positioned to capitalize on a rebound in mergers and acquisitions (M&A), and broader capital market activity, particularly as global dealmaking gains momentum following a period of uncertainty.While market headwinds, such as relatively higher interest rates, geopolitical tensions and Trump’s trade policies, initially dampened sentiment, deal flow is showing signs of recovery. Against this backdrop, investors are revisiting the investment worthiness of GS and MS stock. Let us break down which stock offers more upside potential, based on current fundamentals, growth trajectory and market positioning.GS & MS’s Distinct Strategic Business ModelsGoldman is sharpening its focus on its core strengths in investment banking (IB) and trading while scaling back its consumer banking footprint. The strategic shift aligns with the company’s efforts to concentrate on areas where it has consistently demonstrated strong performance. By leveraging its leadership position, extensive operational scale and exceptional talent, the company aims to strengthen its core businesses and drive growth in areas where it has a competitive edge.In contrast, Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations, and strategic acquisitions, such as Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. These moves have bolstered its diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ aggregate contribution to net revenues soared to more than 55% in 2024 from 26% in 2010. For the first quarter of 2025, the aggregate contribution to net revenues was 50.3%.Both firms faced headwinds in 2022 and 2023, as deal activities slowed dramatically, leading to declines in earnings due to weaker IB revenues. However, 2024 marked a turnaround, with a rebound in global M&A activity driving top and bottom-line growth.Although 2025 began with cautious optimism, uncertainty stemming from Trump’s shifting tariff policies initially dampened dealmaking activity. Still, momentum has since recovered. The data available from Dealogic shows that despite an initial hiccup, the appetite for M&As remains resilient in the face of market volatility, geopolitical tension and Trump’s shifting tariff landscape. Many deals that were put on hold are likely to come back once there is more certainty about the direction of the economy, as capital remains available.Given their prominent roles in M&A advisory and underwriting, both Goldman and Morgan Stanley are well-positioned to benefit from the anticipated continued rebound in investment banking revenues.Goldman & Morgan Stanley’s Impressive Capital DistributionsBoth GS and MS cleared the Federal Reserve’s 2025 stress test, indicating that the banks can withstand a severe recession with plenty of capital on hand to absorb hundreds of billions in losses.After clearing the stress test, both companies announced their plans to return excess capital to shareholders via dividends and share repurchases. Morgan Stanley announced plans to increase its quarterly dividend  8% to $1 per share. Also, the company has reauthorized its share repurchase program of up to $20 billion. MS raised dividends four times in the last five years, with a payout ratio of 43%. Similarly, Goldman plans to hike its dividend 33% to $4 per share. GS raised dividends four times in the last five years with a payout ratio of 28%. It also has a share repurchase plan in place. As of March 31, 2025, GS had $43.6 billion worth of shares available under authorization. At present, MS has a dividend yield of 2.62%, which is higher than the industry average of 1.93% and Goldman’s yield of 1.72%.Dividend Yield Image Source: Zacks Investment Research GS & MS Stock Performance & Valuation AnalysisIn the past year, Goldman shares have gained 48.6%, outpacing Morgan Stanley’s 40.8% rise. In comparison, the Zacks Investment Bank industry has moved up 37.1%.Price Performance Image Source: Zacks Investment Research In terms of valuation, GS holds a notable advantage over Morgan Stanley, with a significant gap between the two. Goldman’s trailing 12-month price-to-tangible book (P/TB) ratio is 2.07X, making its shares more attractive than Morgan Stanley’s 3.01X. Price-to-Tangible Book TTM Image Source: Zacks Investment Research Further, the GS stock is trading at a discount compared with the industry’s trailing 12-month P/TB ratio of 2.83X. This makes the stock more promising for value investors.Goldman & Morgan Stanley’s Earnings EstimatesThe Zacks Consensus Estimate for Goldman’s 2025 and 2026 EPS implies year-over-year increases of 8.9% and 14.8%, respectively. The EPS estimates for 2025 and 2026 have moved upward over the past week.Estimates Revision Trend Image Source: Zacks Investment Research The Zacks Consensus Estimate for Morgan Stanley’s 2025 and 2026 EPS implies year-over-year rallies of 7.4% and 8.4%, respectively. EPS estimates for 2025 have been unchanged, while the same has been revised upward for 2026 over the past week.Estimates Revision Trend Image Source: Zacks Investment Research Final Thoughts on GS & MS’s Investable AnalysisBoth Goldman and Morgan Stanley have a Zacks Rank #3 (Hold), which makes the task of choosing one stock difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. While both GS and MS are tough players with strong long-term prospects, Goldman has more upside potential. Its dominant position in investment banking, robust earnings growth trajectory, aggressive capital return strategy and attractive valuation create a compelling investment case. As M&A activities rebound and capital markets regain momentum, Goldman’s strategic focus and leadership in dealmaking give it a clear edge. For investors seeking a combination of value, solid performance and market leadership, GS presents a better opportunity at this stage.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks