NASDAQ:MSFT
$29.30
(3/16 12:44PM)
+0.0%
| Open | $29.42 |
Mkt Cap | $256.9 Billion |
| High | $29.49 |
52Wk High | $31.50 |
| Low | $29.25 |
52Wk Low | $18.18 |
| Volume | 16.6 Million |
Avg Vol 10D | 46.7 Million |
MSFT Stock Evaluation
Because of a relatively quiet week from a price movement perspective, there has been little change in the valuation of MSFT recently. Furthermore, there has been no change to the earnings guidance given by the company's management in the last week. Those are two key factors in our fundamental analysis which are unchanged since our last report. In accordance with these static factors, we see no catalyst for a ratings change this week.
Recommendation Summary
We are reaffirming our rating on MSFT as of this week’s report. While we firmly believe that valuing companies based on fundamentals is very useful, we are careful not to view historical valuations in a vacuum. It is foolish to believe that a stock will always revert to historical norms. So, although there is value in historical norms, they only tell part of the story. When the market or a sector breaks through strategic thresholds such as standard deviations of historical pricing multiples, we find it necessary to view history with a grain of salt as a new reality may be dawning.
In the last twelve months the NASDAQ has made some gains that start to make a value investor slightly cautious about the future. We are leaving our rating for MSFT unchanged this week even as the Technology sector has actually underperformed the broad market's appreciation. At least in this stock's case, the fundamentals are improving at a rate capable of justifying the stock price appreciation for the time being.
Although the price of MSFT went up by 2.38% since 03/06/2010, this has little affect on our final analysis.
As of this report, there have been no meaningful adjustments in cash earnings expectations or guidance in the last week.
MSFT Revenue
As a value investing shop, we are interested in seeing how MSFT's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 8.02x and the low end of the range at 5.57x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for MSFT of 3.67x is well below its normal historic Price to Sales levels. At a price of $29.27, MSFT is 46% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.
MSFT Cash Earnings
Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. MSFT is significantly below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from MSFT. For example, MSFT's Cash Earnings ratio per share has fluctuated between 18.04 and 25.87 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where MSFT is with respect to prior business periods.
So with MSFT's current price (latest close of $29.27) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, MSFT is 38% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with MSFT.
MSFT Dividends
While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.
In MSFT’s case, the estimated annual dividend is $0.52 resulting in a current dividend yield of 1.78%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from MSFT against the historic high and low levels over the past 10 years. The highest dividend yield from MSFT over this period was 3.35% while the lowest dividend yield was 0.00% Management at MSFT has encouraged us with a current dividend yield of 6.27% above the historical median.
RazorWire: MSFT and Regulators Talked About on Bloomberg News
A regulatory entity and Microsoft Corporation were among the topics covered on Bloomberg News and you can see more details below.
Our sentiment indicator, provided through the Motley Fool CAPS survey, suggests that investors are neutral overall towards MSFT and think that it will generally perform in-line with the S&P 500. When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Microsoft Corporation has actually sunk a bit in comparison to the others. At present, Ockham has a valuation stance of Undervalued on MSFT, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue.
“… one analyst has a buy rating on google, but the key issue is the worry google is becoming MICROSOFT. They had a big issue with windows -- the big hit with windows but were never ... …”
Regulators Interested in MSFT? Possibly as Both Were Discussed on Fox Business
A regulatory entity and Microsoft Corporation were among the topics covered on Fox Business and you can see more details below.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, MSFT has been less covered in the news compared to the rest of our universe of stocks. We consider MSFT as Undervalued at the current price of $29.30. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise. Crowd sentiment is neutral from the millions of opinions submitted through Motley Fool CAPS, which suggests most investors on their platform believe Microsoft Corporation will perform just about the same as the index.
“… one analyst has a buy rating on google, but the key issue is the worry google is becoming MICROSOFT. They had a big issue with windows -- the big hit with windows but were never ... …”
Stocks to Watch: MSFT Heavily Covered on Bloomberg News
MSFT has been one of the most active stocks in the news today, so investors in it will want to pay attention to what is happening.
Based on our methodology, Microsoft Corporation should hold some appeal to value investors as we view it as Undervalued. The Motley Fool CAPS crowd believes this stock will perform generally in line with the benchmark, or in other words the crowd is neutral. We noticed recently that in comparison to all other stocks we analyze in the news; MSFT has received less coverage from the financial media in business television and blogs.
“… So is the ongoing battle with MICROSOFT. Google has been bickering with players in the cell phone business and the chinese government and sometimes the federal trade commission. …”
MSFT Having an Active Day in News, Now on Fox Business
MSFT has been one of the most active stocks in the news today, so investors in it will want to pay attention to what is happening.
The Motley Fool CAPS crowd believes this stock will perform generally in line with the benchmark, or in other words the crowd is neutral. We noticed recently that in comparison to all other stocks we analyze in the news; MSFT has received less coverage from the financial media in business television and blogs. Based on our methodology, Microsoft Corporation should hold some appeal to value investors as we view it as Undervalued.
“… So is the ongoing battle with MICROSOFT. Google has been bickering with players in the cell phone business and the chinese government and sometimes the federal trade commission. …”
Stocks to Watch: MSFT Heavily Covered on Bloomberg News
We are observing a lot of attention being paid to MSFT in the news, so if you hold the stock you may want to take a look at what is going on.
Crowd sentiment is neutral from the millions of opinions submitted through Motley Fool CAPS, which suggests most investors on their platform believe Microsoft Corporation will perform just about the same as the index. As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, MSFT has been less covered in the news compared to the rest of our universe of stocks. We consider MSFT as Undervalued at the current price of $29.30. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise.
“… They either increased or held positions in names like MICROSOFT. Rember that when those debuted last year and it already sold more than 60 million copies. …”
MSFT Having an Active Day in News, Now on Fox Business
We are observing a lot of attention being paid to MSFT in the news, so if you hold the stock you may want to take a look at what is going on.
Based on our methodology, Microsoft Corporation should hold some appeal to value investors as we view it as Undervalued. We noticed recently that in comparison to all other stocks we analyze in the news; MSFT has received less coverage from the financial media in business television and blogs. The Motley Fool CAPS crowd believes this stock will perform generally in line with the benchmark, or in other words the crowd is neutral.
“… They either increased or held positions in names like MICROSOFT. Rember that when those debuted last year and it already sold more than 60 million copies. …”
Look Out for Microsoft Corporation: Its Very Active in the News
We are observing a lot of attention being paid to MSFT in the news, so if you hold the stock you may want to take a look at what is going on.
Based on our methodology, Microsoft Corporation should hold some appeal to value investors as we view it as Undervalued. The Motley Fool CAPS crowd believes this stock will perform generally in line with the benchmark, or in other words the crowd is neutral. We noticed recently that in comparison to all other stocks we analyze in the news; MSFT has received less coverage from the financial media in business television and blogs.
“… MICROSOFT was a big winner. Windows 7 debuted last year. Xbox was the best game-plan consul in figure. > > what with the topic sells and buys? > > ford was the topic by. . …”
More News Than Normal on MSFT from Fox Business
Something important is going on with MSFT today, as it is getting a lot of attention on business television and influential blogs.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, MSFT has been less covered in the news compared to the rest of our universe of stocks. We consider MSFT as Undervalued at the current price of $29.32. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise. Crowd sentiment is neutral from the millions of opinions submitted through Motley Fool CAPS, which suggests most investors on their platform believe Microsoft Corporation will perform just about the same as the index.
“… MICROSOFT was a big winner. Windows 7 debuted last year. Xbox was the best game-plan consul in figure. > > what with the topic sells and buys? > > ford was the topic by. . …”
More News Than Normal on MSFT from InBusiness With Margaret Brennan and Francine Lacqua
MSFT has been one of the most active stocks in the news today, so investors in it will want to pay attention to what is happening.
We noticed recently that in comparison to all other stocks we analyze in the news; MSFT has received less coverage from the financial media in business television and blogs. The Motley Fool CAPS crowd believes this stock will perform generally in line with the benchmark, or in other words the crowd is neutral. Based on our methodology, Microsoft Corporation should hold some appeal to value investors as we view it as Undervalued.
“… The concern is that google is becoming MICROSOFT. It had one big hit, but did not make much money and other businesses. …”
More News Than Normal on MSFT from Fox Business
We are observing a lot of attention being paid to MSFT in the news, so if you hold the stock you may want to take a look at what is going on.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, MSFT has been less covered in the news compared to the rest of our universe of stocks. We consider MSFT as Undervalued at the current price of $29.32. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise. Crowd sentiment is neutral from the millions of opinions submitted through Motley Fool CAPS, which suggests most investors on their platform believe Microsoft Corporation will perform just about the same as the index.
“… The concern is that google is becoming MICROSOFT. It had one big hit, but did not make much money and other businesses. …”