Since last year Microsoft (MSFT) has seen a surge in its share prices. The financial reports and other releases by the company show that the tech-giant has seen a surge by almost 39% in its share prices and that too over the last 12 months. This has also outperformed an 18% return in the S&P 500 index.
In a market where cloud computing rules the scene, more and more software and IT companies are actively developing and marketing cloud-based offerings. Microsoft too isn’t far behind and has recently developed Office 365 and Azure. Both these cloud platforms are set to make Microsoft’s run smooth in the market. The company is now in the early stage of transitioning its Office customer base into Office 365, which is offered through a software-as-a-service model.
If we look at the sale of Office 365, we find that it continues to ramp up. On the Azure front, momentum continues to be strong as the public cloud service has been recently launched in China, making Microsoft the first global public cloud services provider serving the country, where the growth of the public cloud business is estimated to exceed the global average. This apart, the company has also announced a series of new features added onto Azure which would improve integration and configuration of the offerings, making the product more user-friendly to developers. Microsoft has been very generous when it comes to paying out investors. The company has generated an annual operating cash flow margin of at least 33% on a year-on-year basis.
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- MSFT 15-Year Financial Data
- The intrinsic value of MSFT
- Peter Lynch Chart of MSFT
Recent press releases show that MSFT trades at 123.9x consensus estimated 2015 EPS, compared to the S&P 500's forward 2015 P/E multiple of 15.8x.
The analysts have rated the MSFT stock a buy. The company's consensus long-term earnings growth estimate of 8.5% is fairly close to the average estimate of 9.0% for S&P 500 companies. The stock offers a 2.8% dividend yield, compared to the S&P 500's average at just 1.9%, and the price is supported by potential large share buybacks.
Given the way the company has performed, I expect the stocks to see a further surge. This will not only improve the cash flow generation but also increase the ROI. I’d encourage the investors to invest in MSFT.