Is It Too Late to Buy Microsoft Stock? The Motley Fool

Many investors prefer EV to just Market Cap as a better way to determine the value of a company. EBITDA, as the acronym depicts, is earnings before interest, taxes, depreciation and amortization. That means these items are added back into the net income to produce this earnings number.

That’s right — they think these 10 stocks are even better buys. Microsoft (MSFT -1.83%) shows no signs of slowing down from a growth standpoint. Microsoft MSFT released its fiscal fourth-quarter earnings report on July 26. Here’s Morningstar’s take on what to think of Microsoft’s earnings and stock.

Growth Scorecard

While a P/B of less than 3 would mean it’s trading at a discount to the market, different industries have different median P/B values. So, as with other valuation metrics, it’s a good idea to compare it to its relevant industry. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. Computer – Software stocks are, on average, holding a PEG ratio of 2.55 based on yesterday’s closing prices. Better still, this robust cash production allows Microsoft to reward its shareholders with a rising dividend income stream.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1. Investors should also note any recent changes to analyst estimates for Microsoft. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability. Finder monitors and updates our site to ensure that what we’re sharing is clear, honest and current.

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Looking at the earnings estimate revisions for Microsoft, the Zacks Consensus Estimate for the current year has remained unchanged over the past month at $10.90. The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every “Strong Sell” recommendation, brokerage firms assign five “Strong Buy” recommendations.

• Less than 1 means its liabilities exceed its short-term assets (cash, inventory, receivables, etc.).
• Roughly a year ago, Viatris was born from the combination of Pfizer’s established drug unit Upjohn with generic-drug developer Mylan.
• For the current quarter, Microsoft forecast revenue of $54.85 billion to $55.85 billion.
• Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin.

While the hover-quote on Zacks.com, as well as the various tables, displays the delayed intraday quote and price change, this display shows the daily change as of the most recently completed trading day. This is useful for obvious reasons, but can also put the current day’s intraday gains into better context by knowing if the recently completed trading day was up or down. The Daily Price Change displays the day’s percentage price change using the most recently completed close. A higher number is better than a lower one as it shows how effective a company is at generating revenue from its assets. A sales/assets ratio of 2.50 means the company generated $2.50 in revenue for every $1.00 of assets on its books. The Sales to Assets ratio (or Sales to Total Assets or S/TA for short) shows how much sales are generated from a company’s assets.

With its stock near all-time highs, is the tech titan still a good investment?

Microsoft launched a game called Flight Simulator in 1982 that has since become the longest-running video game franchise. Windows used a graphical interface to display information that included drop-down menus, scroll bars, and other features forex atr commonly found in operating systems today. Microsoft’s Productivity and Business Processes segment includes Office, Dynamics, and LinkedIn. We assign this segment a wide moat based on high switching costs and network effects.

• Hence, even if the proposed acquisition of Activision Blizzard does not go through due to antitrust issues, the company is still well-positioned to grow rapidly in the gaming business.
• In Microsoft’s case, that would currently equate to about $2.72 per share.
• You can purchase shares of Microsoft directly in a brokerage account.
• Although Microsoft took a hit on several financial metrics, it reported a 41% adjusted operating margin in its fiscal second quarter — quite impressive in this macroeconomic environment.
• The deal has yet to be completed after being held up by regulatory hearings worldwide.

Through the first six months of 2021, $1.15 billion in debt was repaid. By the end of 2023, $6.5 billion in debt should be repaid, which represents a quarter of the company’s combined debt ($26 billion), as of November 2020. The reason management has chosen these states is due to their billion-dollar sales potential (Illinois hit $1 billion in legal pot revenue in 2020) and their limited-license status.

Before selling any shares, though, make sure you consider capital gains taxes. If stock prices have gone up since you invested your money, you’ll be taxed on your profits, unless you’re investing in a tax-advantaged account. If you want to minimize the amount you may owe, consult with a tax professional. Before investing money in any company, it pays to do your research. The U.S. Securities and Exchange Commission (SEC) requires publicly traded companies like Microsoft to file information about their finances and performance on a quarterly and annual basis.

Financials

Artificial intelligence became a Wall Street sensation earlier this year when the popularity of conversational AI app ChatGPT exploded. Until Meta Platforms launched Threads a few months later, ChatGPT was the fastest-growing app in history. Microsoft is a direct beneficiary of ChatGPT’s success and that of its parent company OpenAI because the two companies have partnered since 2019. Beyond just trimming the fat, Viatris should be able to kick-start its internal drug research in 2024 once debt levels are reduced to more favorable levels. Keep in mind that new drug research would come atop existing biosimilar clinical trials, which are expected to generate billions of dollars in future sales. Time and again, Wall Street has shown investors the power of patience.

The consensus among Wall Street analysts is that investors should “moderate buy” MSFT shares. Azure and other cloud services (40% revenue growth in its fiscal fourth quarter) and LinkedIn (26% revenue growth) were big growth drivers. The company expects revenue and operating income to increase double digits in its 2023 fiscal year.

The lowest price target is $320 (not equivalent to fair value). If one materializes, a slowdown in consumer spending and tightening corporate budgets will undoubtedly hinder Microsoft’s business performance in the short run. Microsoft also has a solid balance sheet, with $99.5 billion in cash on the books and $78 billion in total debt. With cash exceeding debt, the company can comfortably cover its expenses and invest in new opportunities.

Zacks’ proprietary data indicates that Microsoft Corporation is currently rated as a Zacks Rank 3 and we are expecting an inline return from the MSFT shares relative to the market in the next few months. In addition, Microsoft Corporation has a VGM Score of C (this is a weighted average of the individual Style Scores which allow you https://bigbostrade.com/ to focus on the stocks that best fit your personal trading style). Valuation metrics show that Microsoft Corporation may be fairly valued. Its Value Score of C indicates it would be a neutral pick for value investors. The financial health and growth prospects of MSFT, demonstrate its potential to perform inline with the market.

As an investor, you want to buy srocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style. The X Industry values displayed in this column are the median values for all of the stocks within their respective industry.

Cash Flow is net income plus depreciation and other non-cash charges. A strong cash flow is important for covering interest payments, particularly for highly leveraged companies. The Price to Sales ratio or P/S is calculated as price divided by sales. After the P/E ratio, it’s one of the most common valuation metrics. The PEG ratio is the P/E ratio divided by its long-term growth rate consensus. This ratio essentially compares the P/E to its growth rate, thus, for many, telling a more complete story than just the P/E ratio alone.

Microsoft has been in the gaming industry for many years, mainly through its PC gaming and Xbox console businesses. Grand View Research believes the gaming industry could potentially grow to more than $500 billion by 2030, a 10% growth rate over the remainder of this decade. But Microsoft is lagging the market; gaming revenue was up just 1% year over year in the company’s quarter ending June 30.