Microsoft Stock Price Sparks Debate Over Value Amid 30% Surge
Microsoft (MSFT) stock has surged about 30% in three months, including a 19% jump after its July report. With the stock trading near $500 a share, some might think it's too late to buy.
However, despite the recent run-up, Microsoft is still slightly lower than a year ago, while the S&P 500 (SPY) gained about 17%. The consensus on Wall Street is that Microsoft will beat its own forecast again.
The stock trades at around 27 times its profits over the past year, which is below its three-year average of about 32 times. But this lower multiple comes with a net margin of about 40%, the highest in at least five years.
On the other hand, Microsoft's cash flow situation looks expensive, with free cash flow slipping to $67.0 billion from $71.6 billion over the past year. The company spent about $116 billion on capital projects, nearly double the year before.