Microsoft Corporation (MSFT)
During the last year, Microsoft returned a positive performance of 61.6%, with a high of $390.68 and a low of $230.68. Over the same period, the stock outpaced the S&P 500 index by 41.8%. The company's 50-day average price was $371.41 per share as of January 2024. Microsoft Corporation develops and supports software, services, devices and solutions worldwide. Based in Redmond, WA, the large-cap Technology company has 221,000 full time employees. Microsoft has provided a 0.7% dividend yield over the last 12 months.
Exceptional EPS Growth and Healthy Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $110,360 | $125,843 | $143,015 | $168,088 | $198,270 | $211,915 |
| Operating Margins | 32% | 34% | 37% | 42% | 42% | 42% |
| Net Margins | 15% | 31% | 31% | 36% | 37% | 34% |
| Net Income (M) | $16,571 | $39,240 | $44,281 | $61,271 | $72,738 | $72,361 |
| Diluted Shares (M) | 7,768 | 7,691 | 7,616 | 7,555 | 7,473 | 7,462 |
| Earnings Per Share | $2.13 | $5.06 | $5.76 | $8.05 | $9.65 | $9.7 |
| EPS Growth | n/a | 137.56% | 13.83% | 39.76% | 19.88% | 0.52% |
| Avg. Price | $95.75 | $125.6 | $188.22 | $271.68 | $266.86 | $250.3 |
| P/E Ratio | 44.53 | 24.58 | 32.34 | 33.46 | 27.51 | 25.7 |
| FCF (M) | $32,252 | $38,260 | $45,234 | $56,118 | $65,149 | n/a |
| CAPEX (M) | $11,632 | $13,925 | $15,441 | $20,622 | $23,886 | $28,107 |
| EV (M) | $804,792 | $1,025,267 | $1,474,224 | $2,082,372 | $2,025,432 | $1,830,159 |
| EV / EBITDA | 17.76 | 18.76 | 22.42 | 25.52 | 20.7 | 17.88 |
| Total Debt (M) | $77,198 | $75,124 | $64,272 | $61,330 | $50,865 | $50,941 |
| Net Debt / EBITDA | 1.56 | 1.21 | 0.76 | 0.5 | 0.36 | -0.29 |
| Current Ratio | 3.12 | 2.8 | 2.58 | 2.25 | 1.93 | 1.66 |
Microsoft's Valuation Is in Line With Its Sector Averages:
Microsoft has a trailing twelve month P/E ratio of 37.6, compared to an average of 35.0 for the Technology sector. Based on its EPS guidance of $12.94, the company has a forward P/E ratio of 28.7. The compound average growth rate of the company's historical and projected earnings per share is 29.4%. On this basis, the company's PEG ratio is 1.22. Alternatively, we can use the weighted average of Microsoft and the broader market's estimated 5-year EPS growth rate. This normalized growth rate of 10.8% gives us a PEG ratio of 3.34, which suggests that Microsoft may be overpriced. Furthermore, Microsoft is overvalued compared to its book value, since its P/B ratio of 13.08 is higher than the sector average of 7.92.
Microsoft Has an Analyst Consensus of Some Upside Potential:
There are 45 analysts covering Microsoft, with target prices ranging from $285.0 to $480.0 per share, for an average of $412.71. As of January 2024, the company is trading -10.0% away from its average target price, implying there is an analyst consensus of some upside potential. On average, analysts recommend to buy Microsoft.
At 0.7%, Microsoft has a very low short interest. Institutions own 73.0% of the company's shares, and it has a small amount of insider investors because 0.06% are owned by corporate insiders. Overall, the company's top shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $252,197,444,859.
