Microsoft Corp (NASDAQ:MSFT)

CAPS Rating: 3 out of 5

The world’s leading software company, Microsoft is the force behind the Windows operating systems and the Office suite of software.

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Player Avatar CmpsVktr (63.06) Submitted: 1/13/2013 7:09:47 PM : Outperform Start Price: $26.68 MSFT Score: +11.91

MSFT is a solid firm with enduring competitive advantages. In Buffett parlance, it has a wide economic moat.
I rate the firm's fundamentals (financial heath + predictabilty of its business) at 92.5/100 (A-).
However, the firm's managers must do a better job of focusing on the long-run ROIs of its investor-owners.
MSFT stock is trading well below my fair value estimate of $36.7.
Price to FV ratio is 0.76: a 24% margin of safety below fair value.
Over the next 5 years, I forecast that the stock's ROI will outpace the expected market ROI of 7.7% by 2 full percentage points a year. My forecast ROI for MSFT stock is 9.7% a year. ROI is comprised of 3.1% current dividend yield, 0.3% profit growth and 6.4% multiple expansion.
In my view, MSFT stock is a buy (based on its fundamentals) at current levels. I am tracking Mr. Market's sentiments and patiently waiting the technicals to signal a short-term low in the stock price.

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