Microsoft (NASDAQ: MSFT)
Quality Value Investing Research Report | $MSFT Updated Coverage | October 2024
In this updated coverage research report, we reexamine the information technology sector company Microsoft Corporation — MSFT 0.00%↑ — to see if it continues to meet Quality Value Investing’s (QVI) Real-Time Stock Picks criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.
Note: This research report was written and published before Microsoft’s fiscal year 2025 first-quarter earnings release scheduled for the morning of October 30, 2024.
Microsoft | Company Current Wealth
Value Proposition
Microsoft is a dividend-paying large-cap stock in the information technology sector’s systems software industry. It was added to the QVI Real-Time Stock Picks on June 28, 2011, at a $20.12 cost basis per share.
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The company sells its products through OEMs, distributors, and resellers, and directly through digital marketplaces, online, and retail stores. Microsoft was founded in 1975 and is headquartered in Redmond, Washington, USA.
Economic Moat
Morningstar assigns Microsoft a wide moat rating based primarily on switching costs, network effects, and cost advantages.
QVI’s Value Proposition Elevator Pitch for MSFT
Microsoft is the reigning king of productivity software, whether business or personal, cloud or hard drive.
QVI’s value proposition rating for Microsoft: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the table below, Microsoft’s trailing three-year annualized revenue growth was double-digit positive, in line with the S&P 500 topline growth of 17.10%. Moreover, the company’s positive revenue growth of 15.70% aligned with the broader market’s +18.00% for the most recently reported twelve months.
Further down the income statement, Microsoft had a high double-digit net positive profit margin from a 69.80% gross margin, outperforming the S&P 500’s net of 21.00% from a gross of 54.50%.
Returns on Equity and Invested Capital
Microsoft’s senior management produced a return on equity, or ROE, above QVI’s targeted threshold and aligned with the S&P 500’s ROE of 53.80%.
Stock buyback programs often elevate ROE. For example, in September, Microsoft’s board of directors approved purchasing $60 billion of its common shares while announcing a 10% increase in its quarterly dividend and additional capital spending on AI infrastructure.
Microsoft’s return on invested capital, or ROIC, outperformed QVI’s threshold and matched the broader market’s 23.70% return. In addition, the company’s ROIC exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are outstanding capital allocators (Source of WACC: GuruFocus).
QVI’s business fundamentals rating for Microsoft: Bullish.
Next, we’ll look at the company’s enterprise downsize risks, the stock price’s present value, including share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Unless noted, all data presented is sourced from Charles Schwab & Co. as of the market close on October 29, 2024, and intended for illustration only.
Disclosure: As of the date of this research report, I/we held a beneficial long position in MSFT common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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