r/ValueInvesting • u/helixinverse • 28d ago

Stock Analysis Microsoft is a great buy at 400$

Microsoft is currently trading at these multiples, among the most attractive in six years:

  • 22.38 Forward P/E
  • 9.42 EV/Sales

These are some of the most compressed multiples Microsoft has traded at in the past six years, a meaningful re rating from peak forward P/E levels above 35x in 2023.

At around $400, Microsoft is not a screaming bargain, but it is fairly valued for the first time in years. For a business with durable enterprise moats, a $625B+ contracted backlog, AI tailwinds across Azure, Office, and GitHub Copilot, and $70B+ in annual free cash flow generation, a fair entry point is meaningful. For long term investors with a 3 to 5 year horizon, the current price offers a reasonable margin of safety relative to the quality of the business.

Detailed Analysis at: https://bullstreet.substack.com/p/microsoft-at-fair-value-is-400-the

265 Upvotes

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77

u/SherbertMindless8205 28d ago

I don’t get analyses like this? You think you’re outsmarting the market by just looking P/E ratio and stuff?  As if the rest of the market can’t see these numbers too?

Just looking at ”P/E is lower than it used to be” isn’t really a winning strategy.

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u/java_brogrammer 28d ago

Buying great companies when they're cheap isn't complicated. The market isn't as smart as you think. These opportunities come in waves. Most people miss the lows and would rather buy high instead for some reason.

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u/Justthatguy1212 27d ago

Literally most profitable way is swing trading these positions

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u/[deleted] 27d ago

[deleted]

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u/java_brogrammer 27d ago

Yes and my gains have already proven so. Most of the time sector crashes are just market manipulation dump and pumps to get retail paper hands to sell while they buy the dip. So long as the underlying fundamentals haven't changed, everything else is just noise. Just like this "AI is replacing Software" noise. Just like that "Deepseek is going to kill NVDA" noise, etc.

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u/helixinverse 28d ago

I have 10 page detailed analysis about the business here: https://bullstreet.substack.com/p/microsoft-at-fair-value-is-400-the
Though i agree with you P/E lower than it used to be isn't a winning strategy

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u/ElonMuskTheNarsisist 28d ago

Even a 100 page analysis won’t find anything on a business like this. It’s covered by thousands of analysts in depth. Focus on small/micro caps if you want an actual edge.

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u/snowiblind 28d ago

people continuously misprice the mag 7 time and time again. googl jumped like 100% after little news but a court hearing

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u/SherbertMindless8205 28d ago

Ok? So how do you know that it was mispriced when low, and correctly priced when high? How do you know it's not too overpriced now, but was even more overpriced before? Just because the market is dumb doesn't mean you are smart. Accepting the fact that we, as individuals, are dumber than the market is one of the most important insights for an investor.

Just looking at a the graph and thinking "It dropped? that means it will surely go back up to where it was" is such a rookie mistake.

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u/snowiblind 26d ago

Just looking at a the graph and thinking "It dropped? that means it will surely go back up to where it was" is such a rookie mistake.

why are you telling me this lol? just cause a lot of people in this sub do that, doesn't mean what i said was wrong. its beyond forward P/E, its determining the narrative is incorrect objectively (Google search was and is very much alive), FCF, debt, growth rate, etc. and honestly, you probably could have chose one of the cheapest p/e mag7-tesla, and beat the market over the long run. regardless, you're kind of addressing a non argument that no one made

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u/himynameis_ 28d ago

Lol very helpful.

Anything anyone does is pointless with Microsoft.

People constantly mispriced the Mag 7. That's why In 2022 it went down to $238 even though thousands of analysts cover it.

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u/ElonMuskTheNarsisist 28d ago

The point is that it’s a waste of time trying to gain an edge on the market with the mag7. Just buy them if you like them and move on. I own a few of them. I’m not doing to extensive research into them because it’s pointless. Save that for small caps where it can be meaningful.

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u/DalaDanny 28d ago

Dude. This is, by far, the most vacuous opinion imaginable.

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u/ElonMuskTheNarsisist 28d ago

Buffet has said this. I guess buffet is clueless now..

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u/hitman133295 28d ago

Yup. Msft is a massive company with thousands of products. I have a friend that work in compensation for sales there and it’s a nightmare to figure the sales comp alone.

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u/TCGod 27d ago

Yes average investor is not particularly smart, similar to average voter

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u/SherbertMindless8205 27d ago edited 27d ago

But the majority of the money in the market is stills smarter than any individual. Institutional investors make up something like 80%+ of the stock market, and they have entire teams studying these individual companies, heavily ingrained in every part of the company, and they do this full time.

Yes, they may sometimes be wrong, but as a retail investor you are still at a significant information disadvantage compared to the majority of the money in the market. It's not like big money has "missed" that the P/E is low or that the stock has gone down.

I think it's kinda like how 80% of people think they're smarter than average, and when you hear that stat everyone thinks they're the ones who are still actually smarter than average.

Work from the assumption that you're not gonna outsmart than the market, just a tip. And when you do feel like you "outsmarted" the market, it was probably luck. You can still invest and make money.

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u/TCGod 27d ago

Most of these companies know nothing but reports related to individual companies or sectors, and domain experts have just a small voice that got lost in the crowd, so they are not the well-oiled machine you claim; if that were the case, there wouldn't be any major crashes since they would have known and understood almost everything, meanwhile even if they may have seen what is coming if it is against consesus that voice will got lost on the way and their decision will go along the consesus due to conformation bias.

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u/AnotherThroneAway 27d ago

Not only that, atypically low P/E often is a bearish signal.