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Comparing Microsoft’s Valuation with Peers’

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Dec. 4 2020, Updated 10:53 a.m. ET

Comparing market capitalization

On June 20, Microsoft’s (MSFT) market capitalization was $782.7 billion. Meanwhile, tech peers IBM (IBM), Amazon (AMZN), and Oracle (ORCL) had market caps of $130.9 billion, $849.2 billion, and $174.8 billion, respectively, as shown in the graph below.

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Microsoft’s valuation metrics

On June 20, Microsoft’s forward EV[1.enterprise value]-to-EBITDA multiple was ~16.1x. In contrast, IBM’s, Amazon’s, and Oracle’s forward EV-to-EBITDA multiples were ~8.8x, ~28.9x, and ~9.4x, respectively. Microsoft’s forward PE multiple was ~26.6x, while IBM’s, Amazon’s, and Oracle’s PE multiples were ~10.3x, ~139.5x, and ~12.6x, respectively.

Bollinger Band

Microsoft stock closed at $101.87 on June 20, close to its lower Bollinger Band of $98. This value suggests the stock is oversold, and investors may see it as a “buy” signal.

Short interest ratio and stock return

On June 20, Microsoft stock’s short interest as a percentage of its shares outstanding (or short interest ratio) was ~1.9%. Generally, a short interest ratio greater than 40% implies an impending stock price decline. Microsoft stock has returned 45% in the last year, 4.5% in the last month, and -0.4% in the last five days.

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