| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $143,015 | $168,088 | $198,270 | $211,915 | $245,122 | $281,724 |
| Gross Margins | 68% | 69% | 68% | 69% | 70% | 69% |
| Net Margins | 31% | 36% | 37% | 34% | 36% | 36% |
| Net Income (M) | $44,281 | $61,271 | $72,738 | $72,361 | $88,136 | $101,832 |
| Net Interest Expense (M) | $2,591 | $2,346 | $2,063 | $1,968 | $2,935 | $1,600 |
| Depreciation & Amort. (M) | $10,700 | $9,300 | $12,600 | $11,000 | $15,200 | $22,000 |
| Diluted Shares (M) | 7,616 | 7,555 | 7,473 | 7,468 | 7,468 | 7,460 |
| Earnings Per Share | $5.76 | $8.05 | $9.65 | $9.68 | $11.8 | $13.64 |
| EPS Growth | n/a | 39.76% | 19.88% | 0.31% | 21.9% | 15.59% |
| Avg. Price | $187.81 | $271.09 | $281.91 | $376.04 | $422.54 | $416.67 |
| P/E Ratio | 32.27 | 33.39 | 29.06 | 38.69 | 35.63 | 30.41 |
| Free Cash Flow (M) | $45,234 | $56,118 | $65,149 | $59,475 | $74,071 | $71,611 |
| CAPEX (M) | $15,441 | $20,622 | $23,886 | $28,107 | $44,477 | $64,551 |
| EV / EBITDA | 23.11 | 26.23 | 22.27 | 28.43 | 25.44 | 20.7 |
| Total Debt (M) | $64,272 | $61,330 | $50,865 | $52,425 | $47,219 | $43,261 |
| Net Debt / EBITDA | 0.78 | 0.51 | 0.37 | 0.35 | 0.24 | 0.13 |
| Current Ratio | 2.58 | 2.25 | 1.93 | 1.22 | 1.35 | 1.39 |
Microsoft Corporation appears to be an undervalued investment opportunity. The company's strong annualized revenue growth rate of 12.6% and capital expenditure growth rate of 29.1% indicate significant reinvestment of profits into the business. With operating margins at 45.6%, well above the industry average of 15.71%, Microsoft demonstrates strong profitability. Moreover, the company's earnings per share have grown at an annualized rate of 15.5% over the last 6 years, showcasing consistent growth.
On the downside, Microsoft's PEG ratio of 1.82 suggests that the market may be overvaluing the firm's growth potential, as it is above the ideal value of 1. Additionally, the company's gross margins of 69% are in line with the industry average of 63.49%. Microsoft's dividend history is positive, with a current yield of 0.8%, and its free cash flows have averaged $61.94 billion over the last 5 years, with a growth rate of 7.2%.
In terms of valuation, Microsoft's P/E ratio of 24.8 is lower than the sector average of 30.44 and the S&P 500 average of 29.3, indicating potential undervaluation. The company's forward P/E ratio of 21.5 based on earnings guidance of $19.35 per share also suggests favorable valuation. Moreover, Microsoft maintains healthy leverage levels, with a Net Debt / EBITDA ratio of 0.13, lower than the average of 0.4 over the last 5 years.
However, the firm's Price to Book Ratio of 7.47 is higher than the sector average of 4.19, indicating potential overvaluation. Additionally, Microsoft's current ratio of 1.39 indicates that it has just enough current assets to cover its current liabilities.
