memenodes
When your buddy is saying they won’t buy more bitcoin at $90,000 because it feels too risky https://t.co/M2kktujkZ6
tweet

Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $MSFT 🧘🏽‍♂️

•NTM P/E Ratio: 29.25x
•5-Year Mean: 30.92x

•NTM FCF Yield: 1.98%
•5-Year Mean: 2.80%

As you can see, $MSFT appears to be trading near fair value on an earnings basis

Going forward, investors can expect to receive ~6% MORE in earnings per share & ~29% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $MSFT is a quality business

BALANCE SHEET✅
•Cash & Equivalents: $102.01B
•Long-Term Debt: $35.38B

$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 58x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2021: 31.1%
•2022: 34.0%
•2023: 30.9%
•2024: 29.7%
•2025: 28.0%

RETURN ON EQUITY✅
•2021: 47.1%
•2022: 47.2%
•2023: 38.8%
•2024: 37.1%
•2025: 33.3%

$MSFT has great return metrics, highlighting the financial efficiency of the business

REVENUE✅
•2021: $168.09B
•2026E: $326.83B
•CAGR: 14.22%

FREE CASH FLOW🆗*
•2021: $56.12B
•2026E: $75.70B
•CAGR: 6.17%

*This is largely due to heavy AI-related reinvestment — current 2028 FCF estimate $116.45B

NORMALIZED EPS✅
•2021: $7.97
•2026E: $16.10
•CAGR: 15.10%

SHARE BUYBACKS✅
•2016 Shares Outstanding: 8.01B
•LTM Shares Outstanding: 7.46B

By reducing its shares outstanding ~7%, $MSFT increased its EPS by ~8% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 68.8%
•LTM Operating Margins: 46.3%
•LTM Net Income Margins: 35.7%

PAID DIVIDENDS✅
•2015: $1.24
•2025: $3.32
•CAGR: 10.34%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~6% MORE in EPS & ~29% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MSFT has to grow earnings at a 14.63% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be more than the (14.63%) required growth rate:

2026E: $16.10 (18% YoY) *FY Jun

2027E: $18.73 (16% YoY)
2028E: $22.27 (18% YoY)

$MSFT has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $MSFT ends 2028 with $22.27 in EPS & see its CAGR potential assuming different multiples

32x P/E: $712💵 … ~16.7% CAGR

30x P/E: $668💵 … ~13.9% CAGR

29x P/E: $646💵 … ~12.4% CAGR

28x P/E: $623💵 … ~10.9% CAGR

27x P/E: $601💵 … ~9.4% CAGR

As you can see, we’d have to assume a 28x multiple for $MSFT to have attractive return potential

At 27x earnings $MSFT has ok CAGR potential

$MSFT is one of the highest quality companies in the world & is firing on all cylinders

Although I wouldn’t want to rely on a >30x multiple, I feel comfortable accumulating $MSFT shares at ~$485💵 while relying on 28x - 29x

I consider $MSFT a steal with a large margin of safety at $440💵, where I can reasonably expect ~12% CAGR while assuming a more conservative 26x
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️

𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.

𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
tweet

Quartr
Edge #69: Duolingo

How does a nagging green owl translate into one of the strongest subscription businesses in consumer tech?

Coming to your inbox in a few hours. https://t.co/C0UaWhfHSJ
tweet

Wasteland Capital
What exactly is the conclusion from the @michaeljburry GPU depreciation case? People will need to buy more (or less?) GPUs because they get older faster (or slower?) than current market expectations? What is his trade? I don’t get it.
tweet

Fiscal.ai
ServiceNow CEO Bill McDermott:

"It used to be the Mag7. Now there's a new category. I'm calling this the Super 8. That's the Mag7 plus ServiceNow. That's right, the Super 8."

$NOW https://t.co/kts5UMF8Gx
tweet

Quiver Quantitative
Wow.

Earlier this year, a stock trade by Representative Robert Bresnahan caught our eye.

We posted this report.

$CRDO has now risen 141% since his trade. https://t.co/aNLyllpB4k
tweet

Quiver Quantitative
UPDATE: Last year, we noticed a suspicious trade made by Representative Debbie Wasserman Schultz.

We posted this report.

$HL has now risen 229% since the trade was made: https://t.co/QWVp8UtbnQ
tweet

App Economy Insights
💡 Insights you might have missed

🧬 Abbott buys Exact Sciences
☁️ Oracle’s AI hangover
📉 What’s actually priced in

Free article just dropped 👇
https://t.co/bB4sY62mNv
tweet