Why Microsoft (MSFT) Could Be Your Next Growth Stock Investment

Growth-oriented investors are always on the hunt for stocks that can provide above-average returns, typically by seizing on companies with significant increases in their financials. Uncovering a true growth gem is challenging, given the accompanying high volatility and risks, and there’s always the possibility of investing in a company whose growth phase has peaked.

Growth Metrics and Microsoft’s Edge

Using various analytical tools such as the Zacks Growth Style Score, which assesses real growth potential beyond basic financial metrics, can help investors identify promising growth stocks. Microsoft (MSFT) emerges as a top candidate with its excellent Growth Score and a strong Zacks Rank.

Research indicates that stocks with robust growth characteristics and those with an A or B Growth Score combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) have historically had superior market performance.

Three Key Reasons for Microsoft’s Growth

Earnings Growth

Earnings growth is critical for investors, with many seeking companies showing double-digit increases in profits. Microsoft has displayed an impressive historical EPS growth rate of 21.3%, and projections indicate an EPS growth of 13.4% for the current year, outpacing the industry average growth forecast of 12.4%.

Efficient Asset Utilization

An often overlooked aspect by investors is the asset utilization ratio, which measures how effectively a company uses its assets to generate sales. Microsoft stands out with a sales-to-total-assets ratio of 0.54, indicating that it generates $0.54 for every dollar in assets, showing better efficiency than the industry average of 0.48.

Alongside this efficiency, a company’s sales growth is important, and Microsoft’s projected sales growth of 14.3% for the current year comfortably exceeds the industry average of 5.7%.

Positive Earnings Estimate Revisions

The trend in earnings estimate revisions can also serve as a performance indicator, with a positive trajectory aligning with potential stock price increases. Microsoft has seen upward revisions in earnings estimates, contributing to a 2.1% rise in the Zacks Consensus Estimate for the current year over the past month.

Conclusion

Considering these factors—the company’s high Growth Score, favorable Zacks Rank, and positive earnings estimate revisions—Microsoft is well-positioned for growth. Consequently, investors looking for growth stocks might consider including Microsoft in their portfolios.

Microsoft, Growth, Investment