Market Inference Overview -- MSFT Stock

Microsoft shares declined -17.15% over the last 52 weeks, with a high of $312.88 and a low of $212.3. During this time, the stock lagged the S&P 500 index by -7.71%. As of January 2022, the company's 50-day average price is $246.53. Microsoft Corporation is an American multinational technology company which produces computer software, consumer electronics, personal computers, and related services. The large-cap Technology company is based in Redmond, WA. Microsoft has returned a 1.09% dividend yield over the last 12 months.

Exceptional EPS Growth with Low Leverage Levels:

2019-06-30 2020-06-30 2021-06-30 2022-06-30
Revenue (MM) $123,495 $140,503 $165,936 $196,109
Revenue Growth n/a 13.77% 18.1% 18.18%
Gross Margins 67.15% 68.99% 69.82% 69.16%
Gross Margins Growth n/a 2.74% 1.2% -0.95%
Operating Margins 34.79% 37.69% 42.13% 42.52%
Operating Margins Growth n/a 8.34% 11.78% 0.93%
Earnings Per Share $5.13 $5.85 $8.15 $9.75
EPS Growth n/a 14.04% 39.32% 19.63%
Diluted Shares (MM) 7,643 7,571 7,519 7,464
Free Cash Flow (MM) $38,260 $45,234 $56,118 $65,149
FCF Growth n/a 18.23% 24.06% 16.09%
Capital Expenditures (MM) $13,925 $15,441 $20,622 $23,886
Net Debt / EBITDA 1.26 0.92 0.68 0.43

Microsoft Is Reasonably Valued:

Compared to the Technology sector's average of 27.16, Microsoft has a trailing twelve month P/E ratio of 27.52 and, according to its EPS guidance of 10.74, an expected P/E ratio of 23.06.

Microsoft's P/B ratio is 11.05 compared to its sector average of 6.23. The company is likely overvalued in terms of its net asset value. The company's shares are currently trading 322.52% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 6.21 * 24.59) = $58.62

Microsoft's strong cash flow trend and reasonable levels of debt attenuate the company's lofty valuation in terms of earnings and assets.

Microsoft Is the Subject of Mixed Market Indicators:

45 analysts are following Microsoft and have set target prices ranging from $212.0 to $348.0 per share. On average, they have given the company a rating of buy. At the current price of $247.68, MSFT is trading -13.47% away from its average analyst target price of $286.24 per share, implying an analyst consensus of some upside potential for the stock.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.