Stock Tip: MSFT

Vote 0 Votes

I've been doing some research on Microsoft, here's an excerpt of an email I wrote to a friend making an argument for an investment in the software giant. I'm still doing my due diligence, but figured I'd share it here. Comments, thoughts, concerns?


Shares trading at $25.75
EPS = 2.33
P/E = 11.05 off trailing earnings
Cash per share = $5.15
Share Price less cash = $20.60
P/E with cash excluded = 8.9

Long-Term Debt is about 10% of Market cap. They've been issuing ridiculously cheap debt on the capital market to lower their cost of capital, which is fine for the equity holders.

Dividend Yield = 2.5%, they've been growing the dividend most years since they started issuing one, and are aggressively buying back shares.

Cash generation is very good. They made $24 billion from operations last year and borrowed $1.2 B. They spent $2B on CapEx, paid $4.6B in dividends, bought back $9B of stock, and built cash by $7.4B and allowed Accounts receivable to swell by $2B.

And did I mention, they're virtually a monopoly with low fixed costs and a 30% margin... and you might think that all those companies who will be upgrading to Office 2010 are priced in, except they're not.

2010 was record revenues and profits.

I read through most of the financials last night. Except for a $10B permanent deferred income tax liability (foreign) that doesn't show up on the balance sheet, I didn't see anything too alarming.

1 Comment

Pulled the trigger today (11/22/11) at $25.50. Here's hoping the new Xbox Kinnect is as awesome as the commercials look.

About this Entry

This page contains a single entry by Byron published on November 17, 2010 1:30 PM.

Terms of Service was the previous entry in this blog.

President Obama's secret plan to privatize Social Security? is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.