Microsoft Corporation (NASDAQ:MSFT) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$359 at one point, and dropping to the lows of US$307. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Microsoft's current trading price of US$320 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Microsoft’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Microsoft
Is Microsoft Still Cheap?
According to my valuation model, Microsoft seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Microsoft today, you’d be paying a fair price for it. And if you believe that the stock is really worth $361.19, then there’s not much of an upside to gain from mispricing. Furthermore, Microsoft’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Microsoft generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Microsoft's earnings over the next few years are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? MSFT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on MSFT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Microsoft, you'd also look into what risks it is currently facing. For example - Microsoft has 1 warning sign we think you should be aware of.
If you are no longer interested in Microsoft, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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