If you're looking for a good stock to buy, I just noticed that there's some
sort of software outfit in the Seattle area. Here's a look at Microsoft 's (
$MSFT ) stock and its EPS line. The stock line is in blue and if follows the
left scale. EPS is in gold and it follows the right. The two lines are scaled at
a ratio of 15-to-1. The forward earnings represent Wall Street's consensus for
Microsoft stock. Microsoft is currently expected to earn $2.63 per share in this
calendar year which means the stock is trading at about 9.6 times this year's
estimate. The S&P 500 is expected to earn 96.69 this year which means it's
trading at 13.5 times this year's estimate. That means Microsoft (NASDAQ: MSFT
) is going for a 29% discount to the market's valuation. On top of that, MSFT
stock is holding $4.76 in cash which generates almost no income. This means that
the "operations" assets of Microsoft are probably going for around eight
times earnings. Microsoft stock looks cheap. Ed Elfenbein is editor of Crossing
Wall Street, a Web site about stocks and the market designed to help individual
investors. Check out his free Buy List of stock recommendations.
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