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.

by Louis Stevens from seekingalpha.com

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