salesforce.com, inc. (CRM): Has Microsoft Corporation (MSFT) Become the Perfect Stock?

Page 1 of 2

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing’s for sure: You’ll never discover truly great investments unless you actively look for them. Let’s discuss the ideal qualities of a perfect stock and then decide whether Microsoft Corporation (NASDAQ:MSFT) fits the bill.

Microsoft Corporation (MSFT)

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it’s certainly a better sign than a stagnant top line.

Margins. Higher sales mean nothing if a company can’t produce profits from them. Strong margins ensure that company can turn revenue into profit.

Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management’s attention. Companies with strong balance sheets don’t have to worry about the distraction of debt.

Moneymaking opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.

Valuation. You can’t afford to pay too much for even the best companies. By using normalized figures, you can see how a stock’s simple earnings multiple fits into a longer-term context.

Dividends. For tangible proof of profits, a check to shareholders every three months can’t be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let’s take a closer look at Microsoft Corporation (NASDAQ:MSFT).

Factor What We Want to See Actual Pass or Fail?
Growth 5-year annual revenue growth > 15% 4.7% Fail
1-year revenue growth > 12% 1.2% Fail
Margins Gross margin > 35% 75.4% Pass
Net margin > 15% 21.2% Pass
Balance sheet Debt to equity < 50% 19.6% Pass
Current ratio > 1.3 2.81 Pass
Opportunities Return on equity > 15% 22.6% Pass
Valuation Normalized P/E < 20 14.81 Pass
Dividends Current yield > 2% 3.3% Pass
5-year dividend growth > 10% 15.4% Pass
Total score 8 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Microsoft last year, the company has kept its eight-point score for the third year in a row. But the share price hasn’t held up well, falling nearly 15% over the past year.

With its reliance on the declining PC industry, Microsoft Corporation (NASDAQ:MSFT) has long known it needs to get into mobile devices. But so far, Microsoft’s attempts to become relevant in the mobile space have had mixed success at best. The original version of the Surface tablet has posted disappointing sales, and although the Surface Pro has more promise as a full-featured device with the capability to run Office and other popular software, its price may prove too high to lure all the customers that Microsoft needs to tap for the platform to reach its full potential.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!