Multiple views of MSFT

Trevelyan
2022-07-01

$Microsoft(MSFT)$

The Bullish: Quality matters and matters a lot.

The Bearish: Valuation matters and matters a lot.

The Future view: Growth matters and matters a lot.

The operational quality of  $Microsoft(MSFT)$ is really impressive. The considerable premium valueation is currently being reduced. 

The stock has a current blended P/FCF ratio of 29.55. A

n average 10 year P/FCF ratio of 23.43.An average 5 year P/FCF ratio even of 31.89.Phew, take a deep breath. After that it was even undervalued at 7.34%. Kind of crazy.

Analysts expect Microsoft to grow at a rate of 19.8% in unleveraged FCF over the next 5 years and between 15% and 16% operationally. Unbelievable.

Then a 5y P/FCF/G ratio of 1.49, which is really good under optimistic assumptions.

Optimism + Realism = Rationalism.

Optimism − realism = illusionism.

If the assumptions are correct, Microsoft is a rational buy, if not then an illusory one.

The Objective view: Realism matters and matters a lot.

But what is realism?

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