Microsoft: A Gift At 22x P/E (Rating Upgrade)

2026-04-01 13:32:05 ET

Buying MSFT stock at 22x P/E is a no brainer

I last wrote on Microsoft Corporation ( MSFT ) stock on Feb 20 in an article titled “ Microsoft: Why I Set A $370 Buy Order .” That article was triggered by the changes in MSFT's implied volatility and Bollinger Bands at time. These changes have led me to see good odds for the share price to dip to $370 in the near future. And I further presented the following comments to argue why this price would be an excellent entry point for long-term investors:

Any P/E around 20x is a no-brainer for a stock with ROCE (return on capital employed) around 65% like MSFT in my experience. At $370, MSFT would be priced around 22x FWD based on its latest EPS projections. At this level of ROCE, a 10% reinvestment rate would provide 6.5% organic real growth rates (and that is before inflation escalator). And a ~22x P/E would at least provide 4.5% of earnings yield in MSFT’s case as its owners ’ earnings yield consistently exceeds its EPS.

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