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As Microsoft Corporation (NASDAQ:MSFT) announced its earnings release on 30 June 2019, analysts seem cautiously bearish, with earnings expected to grow by 2.8% in the upcoming year compared with the higher past 5-year average growth rate of 13%. By 2020, we can expect Microsoft’s bottom line to reach US$40b, a jump from the current trailing-twelve-month of US$39b. Below is a brief commentary around Microsoft’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
See our latest analysis for Microsoft
How will Microsoft perform in the near future?
The longer term expectations from the 31 analysts of MSFT is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for MSFT, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 9.1% based on the most recent earnings level of US$39b to the final forecast of US$50b by 2022. EPS reaches $6.61 in the final year of forecast compared to the current $5.11 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 31% to 29% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Microsoft, I’ve put together three pertinent aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Microsoft worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Microsoft is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Microsoft? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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