As of July 18, 2023, Microsoft Corp (MSFT, Financial) has been making waves in the market with its stock price standing at $359.49, marking a 3.98% change for the day. With a market cap of a staggering $2.7 trillion and sales reaching $207.6 billion, Microsoft has become a focal point for investors. The GF Value, a unique valuation metric by GuruFocus, places Microsoft's fair value at $332.93, indicating that the stock is currently fairly valued.
Microsoft, a renowned name in the tech industry, develops and licenses consumer and enterprise software. It's known for its Windows operating systems and Office productivity suite. The company operates in three broad segments: productivity and business processes, intelligence cloud, and more personal computing. With a rich history and diversified business operations, Microsoft continues to be a staple in the global tech landscape.
GF Value: A Fair Valuation for Microsoft (MSFT, Financial)
The GF Value of Microsoft (MSFT) indicates that the stock is fairly valued. The GF Value is calculated based on historical trading multiples, past performance, and future business performance estimates. A stock price significantly above the GF Value Line suggests overvaluation, while a price significantly below indicates potential for higher future returns. Given Microsoft's current price and market cap, the stock appears to be fairly valued, suggesting that its long-term return is likely to align with the rate of its business growth.
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Financial Strength: A Key Factor
Investing in companies with robust financial strength reduces the risk of permanent loss. Microsoft's cash-to-debt ratio of 1.73, although lower than 57.59% of companies in the Software industry, indicates strong financial health. The overall financial strength of Microsoft is 8 out of 10.
Profitability and Growth: The Twin Pillars
Microsoft has consistently shown profitability over the past 10 years, making it a safer investment choice. With an operating margin of 40.85%, it ranks better than 97.96% of companies in the Software industry. Its 3-year average annual revenue growth of 17.4% and EBITDA growth rate of 21.1% also outperform a majority of its industry peers.
Comparing Microsoft's return on invested capital (ROIC) of 25.87 with its weighted average cost of capital (WACC) of 9.74 further underscores its profitability. A higher ROIC than WACC is always a positive sign.
Conclusion
In conclusion, Microsoft (MSFT, Financial) stock is fairly valued. The company's strong financial condition, robust profitability, and impressive growth make it an attractive investment. For more in-depth financial data about Microsoft, check out its 30-Year Financials here.
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