Microsoft: Assessing Quarterly Results Of A 'New Value' Play (NASDAQ:MSFT
published 27.07.2020 10:06
In our present challenging business environment, Microsoft managed to grow its quarterly revenue by 13% y/y (and free cash flow by 16% y/y).
Microsoft's Productivity and Business Processes revenue growth rate slowed down drastically from ~15% to just 6%.
In the long term, I see Personal Computing as a stable to slightly declining revenue and free cash flow stream for Microsoft over the next decade.
As can be seen above, I estimate Microsoft to grow its free cash flow per share organically, i.e., via its cash from operations less capex, at about 10% annualized over the next 10 years.
At the end of ten years worth of growth, I multiply the resulting free cash flow per share by a conservative Price to FCF ratio of 25x (Microsoft trades at Price to FCF of 34.4x right now and Proctor and Gamble (PG) trades at 25x with nearly zero percent growth.