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Microsoft (MSFT) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3 min read

Microsoft (MSFT) closed at $217.90 in the latest trading session, marking a +0.1% move from the prior day. This change lagged the S&P 500's 0.71% gain on the day. Meanwhile, the Dow gained 0.56%, and the Nasdaq, a tech-heavy index, added 0.95%.

Coming into today, shares of the software maker had gained 1.59% in the past month. In that same time, the Computer and Technology sector gained 0.85%, while the S&P 500 gained 0.17%.

Investors will be hoping for strength from MSFT as it approaches its next earnings release. The company is expected to report EPS of $1.64, up 8.61% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $40.12 billion, up 8.72% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $6.73 per share and revenue of $157.35 billion, which would represent changes of +16.84% and +10.02%, respectively, from the prior year.

Any recent changes to analyst estimates for MSFT should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.17% lower. MSFT currently has a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that MSFT has a Forward P/E ratio of 32.36 right now. This represents a discount compared to its industry's average Forward P/E of 33.23.

Meanwhile, MSFT's PEG ratio is currently 2.45. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MSFT's industry had an average PEG ratio of 2.8 as of yesterday's close.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 167, which puts it in the bottom 35% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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Zacks Investment Research