Microsoft Corporation Quarterly Valuation – February 2015 $MSFT

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Microsoft passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.12 in 2011 to $2.40 for 2015. This is a strong level of demonstrated growth but it is below the market’s implied estimate for earnings growth of 4.64% over the next 7-10 years. In fact, the historical growth is around 2.56% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.

Be sure to check out previous ModernGraham valuations of Microsoft Corporation (MSFT) for greater perspective!

Read the full valuation on Seeking Alpha!

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Disclaimer:  The author did not hold a position in Microsoft Corporation (MSFT) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.


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2 responses to “Microsoft Corporation Quarterly Valuation – February 2015 $MSFT”

  1. Arobindo Dutt Avatar
    Arobindo Dutt

    My understanding is Mr. Graham was a value investor, not 1/4 by 1/4. So why do you are so uptight about MSFT,s February valuation? Isn,t it a moot issue in the big picture? I am more interested in intrinsic value as opposed to trader.

    1. Benjamin Clark Avatar

      The point is to update the intrinsic value on a quarterly basis when a company qualifies for either the Defensive Investor or the Enterprising Investor. I’m certainly very interested in the intrinsic value, and less interested in the daily price changes.

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