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Today we're going to take a look at the well-established Microsoft Corporation (NASDAQ:MSFT). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$402 to US$439. However, is this the true valuation level 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
What Is Microsoft Worth?
According to our valuation model, Microsoft seems to be fairly priced at around 17% below our intrinsic value, which means if you buy Microsoft today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $510.15, then there’s not much of an upside to gain from mispricing. In addition to this, Microsoft has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Microsoft look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Microsoft's earnings over the next few years are expected to increase by 50%, 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 financial strength of the company. 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 tabs 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Microsoft has 1 warning sign and it would be unwise to ignore this.