A moat score of 89 and a management score of 100 point to a business with durable competitive advantages and exceptional stewardship of capital. Return on invested capital of 20.6%, gross margin of 67.9%, and debt to equity of just 0.3x back this up: the company earns high returns on the capital it deploys while carrying little financial risk. History shows growth of 15.0%, but the model caps its projection at 14.6%, a deliberate conservatism rather than a reflection of any slowdown.
The tension sits in the price. At $503.81, shares trade well above every valuation anchor here, the margin of safety price of $251.99, the 10-cap price of $136.55, and the payback time price of $211.41. The market is pricing in a 29.1x exit multiple against a current 28.1x earnings multiple, while free cash flow yield sits at just 2.4%.
The margin of safety score of 50 captures this split cleanly. The underlying business, by these figures, looks close to as good as they get. The price being asked for it leaves little room drawn from the same numbers that make the business look strong.
| Price | $493.78 |
| Market cap | $3.7T |
| P/E ratio | 27.5x |
| Return on invested capital | 20.6% |
| Gross margin | 67.9% |
| Debt to equity | 0.29x |
| Free cash flow yield | 2.4% |
| Growth rate used | 14.6% |
| Growth rate measured | 15.0% |
| Exit multiple assumed | 29.1x |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Microsoft Corporation rather than accepting ours.