Microsoft Corporation (NASDAQ:MSFT): What Does The Future Look Like?

February 26, 2019

On 31 December 2018, Microsoft Corporation (NASDAQ:MSFT) released its earnings update. Generally, analyst consensus outlook appear cautiously optimistic, as a 7.5% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 1.4%. Currently with trailing-twelve-month earnings of US$17b, we can expect this to reach US$18b by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Microsoft in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Microsoft

Can we expect Microsoft to keep growing?

The 31 analysts covering MSFT view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of MSFT's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NasdaqGS:MSFT Past and Future Earnings, February 26th 2019

By 2022, MSFT's earnings should reach US$23b, from current levels of US$17b, resulting in an annual growth rate of 11%. This leads to an EPS of $5.63 in the final year of projections relative to the current EPS of $2.15. Margins are currently sitting at 15%, approximately the same as previous years. With analysts forecasting revenue growth of 0.34673 and MSFT's net income growth expected to roughly track that, this company may add value for shareholders over time.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Microsoft, there are three fundamental factors you should further research:

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.