Over the last six months, Microsoft’s shares have sunk to $420.75, producing a disappointing 16.8% loss - a stark contrast to the S&P 500’s 7.7% gain. This may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for MSFT? Find out in our full research report, it’s free.
Why Are We Positive On Microsoft?
Originally named "Micro-soft" for microcomputer software when founded in 1975, Microsoft (NASDAQ: MSFT) is a global technology company that develops software, cloud services, devices, and AI solutions for consumers, businesses, and organizations worldwide.
1. Skyrocketing Revenue Shows Strong Momentum
Microsoft shows that fast growth and massive scale can coexist despite conventional wisdom. The company’s revenue base of $160 billion five years ago has nearly doubled to $318.3 billion in the last year, translating into an exceptional 14.8% annualized growth rate.
Over the same period, Microsoft’s big tech peers Amazon, Alphabet, and Apple put up annualized growth rates of 12.1%, 16.5%, and 6.8%, respectively. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it shows whether a company’s growth is profitable. It also explains how taxes and interest expenses affect the bottom line.
Microsoft’s EPS grew at 18% compounded annual growth rate over the last five years, higher than its 14.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills or invest for the future.
Microsoft has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the software sector, averaging 27.3% over the last five years.
Final Judgment
These are just a few reasons why we think Microsoft is a high-quality business. With the recent decline, the stock trades at 22.4× forward price-to-earnings (or $420.75 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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