MSFT Stock Study (3-15-26)

Posted by Mark on March 16, 2026 at 07:16 | Last modified: March 15, 2026 10:42

I recently did a stock study on Microsoft Corp. (MSFT, $395.55).

M* writes:

     > Microsoft develops and licenses consumer and enterprise
     > software. It is known for its Windows operating systems
     > and Office productivity suite. The company is organized
     > into three equally sized broad segments: productivity
     > and business processes (legacy Microsoft Office, cloud-
     > based Office 365, Exchange, SharePoint, Skype, LinkedIn,
     > Dynamics), intelligence cloud (infrastructure- and
     > platform-as-a-service offerings Azure, Windows Server
     > OS, SQL Server), and more personal computing
     > (Windows Client, Xbox, Bing search, display advertising,
     > and Surface laptops, tablets, and desktops).

Over the past decade, this mega-size ( > $100B annual revenue) company grows sales and EPS at annualized rates of 14.6% and 25.1%, respectively (FY ends Jun 30). Lines are up, straight, and parallel. Value Line (VL) gives an Earnings Predictability score of 100. Shares outstanding decrease 6.8% (0.8%/year).

Over the past decade, PTPM trails peer and industry averages while increasing from 23.1% to 43.9% (’25) with a last-5-year mean of 42.9%. ROE is roughly even with peer and industry averages while ranging from 21.9% in ’16 to 45.0% in ’21 with a last-5-year mean of 38.5%. Debt-to-Capital is less than peer and industry averages while falling from 42.7% to 15.0% (’25) with a last-5-year mean of 23.3%.

Quick Ratio is 1.12 and Interest Coverage 56.4 per M* who assigns “Wide” Economic Moat, “Exemplary” rating for Capital Allocation, and an A grade for Financial Health (per BetterInvesting® website). VL gives an A++ rating for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 16.4% and 15.4% for ’26 and ’27 (based on 48 analysts).
• Zacks gives YOY ACE 16.1% and 14.4% for ’26 and ’27, respectively (17 analysts).
• VL gives 6.3% per year from ’24-’29.
• CFRA projects 16.4% YOY and 15.6% per year for ’26 and ’25-’27, respectively.
• M* gives 2-year ACE of 15.9% per year and projects 5-year annualized 11.4% in Equity Report.

I am forecasting below the range at 6.0% per year.

With regard to EPS growth:

• MarketWatch gives ACE 16.5% and 18.8% per year for ’25-’27 and ’25-’28, respectively (based on 60 analysts).
• Nasdaq.com gives ACE 15.5% and 15.9% per year for ’26-’28 and ’26-’29 [13 / 7 / 1 analyst(s) for ’26 / ’28 / ’29].
• Seeking Alpha projects 4-year annualized of 13.5%.
• Finviz gives ACE 5-year annualized of 18.2% (14).
• Argus gives 5-year annualized of 12.0%.
• LSEG projects LTG of 16.0%.
• YF gives YOY ACE 22.7% and 12.6% for ’26 and ’27, respectively (30).
• Zacks gives YOY ACE 24.4% and 10.4% for ’26 and ’27, respectively, and 5-year annualized of 15.6% (18).
• VL gives 11.0% annualized from ’24-’29.
• CFRA projects 18.5% YOY and 17.7% per year for ’26 and ’25-’27 along with 3-year CAGR of 15.0%.
• M* gives ACE long-term 15.1%/year and projects 16.9% annualized from ’24-’29 in Equity Report.

My 11.0% forecast is at bottom of the long-term-estimate range (mean of eight: 14.8%). Initial value is ’25 EPS of $13.64/share rather than 2026 Q2 $15.99 (TTM).

My Forecast High P/E is 30.0. Over the past 10 years, high P/E ranges from 26.9 in ’17 to to 38.7 in ’24 (excluding upside outlier of 48.2 in ’18) with a last-5-year mean of 36.3 and last-5-year-mean average P/E of 30.5 (also excluding upside low P/E outlier in ’18). I am below the latter.

My Forecast Low P/E is 21.0. Over the past 10 years, low P/E increases from 18.9 to 25.3 (’25) with a last-5-year mean of 24.6. I am forecasting the lowest since 2019.

My Low Stock Price Forecast (LSPF) of $286.50 is based on initial value from above. This is 27.6% less than previous close and 16.9% less than 52-week low.

Over the past 10 years, Payout Ratio (PR) falls from 66.2% to 23.8% (’25) with a last-5-year mean of 25.7%. I am forecasting below the range at 23.0%.

These inputs land MSFT in the HOLD zone with a U/D ratio of 2.7. Total Annualized Return (TAR) is 12.5%.

PAR (using Forecast Average—not High—P/E) of 9.1% is decent for a mega-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with Member Sentiment (MS). Based on 711 studies done in the past 90 days (my study and 238 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 13.5%, 13.1%, 33.0, 23.6, and 25.7% respectively. I am lower across the board. VL projects a future average P/E of 34.0 that is much greater than MS (28.3) and greater than mine (25.5).

MS high / low EPS are $28.25 / $14.66 versus my $22.98 / $13.64 (per share). My high EPS is less mainly due to a lower growth rate. VL (M*) high EPS of $23.00 ($25.46) is in the middle.

MS LSPF of $333.20 implies a Forecast Low P/E of 22.7: less than the above-stated 23.6. MS LSPF is 3.7% less than the default $14.66/share * 23.6 = $345.98 resulting in more conservative zoning. MS LSPF exceeds mine by 16.3%, however.

MOS is robust in the study because my growth rates are less than or at the bottom of historical/analyst/MS averages/ranges. A P/E disconnect seems to occur in 2020 and my forecast P/E numbers are below those of 2020 and beyond. Also supportive of the MOS is MS TAR exceeding mine by 5.5% per year and my substantially lower LSPF.

Regarding valuation, PEG is 1.5 and 2.0 per Zacks and my projected P/E, respectively: slightly high, perhaps (M* has 1.3). Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.81. M* has stock trading at a 34% discount while “Quick and Dirty” DCF method perplexingly has stock overvalued by 40% due to heavy future CapEx projections.

Per U/D, MSFT is a BUY under $387/share. BetterInvesting® TAR criterion would be met [689.4 / ((14.07 / 100 ) +1 ) ^ 5]
~ $357 given a forecast high price ~$689.

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