FAST Graphs on $MSFT (Oct 27, 2026)
Microsoft's forecast growth near 18.89% probably does not justify a P/E of 29; trading above fair value, as it almost always has, means paying more than it is worth and carries risk, while NVDA trades at 28 with higher growth. Yet a return to its five-year average multiple could let it capture significant growth, and 18.89% is far easier to hit than 50%.
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Now, looking at the next company, Microsoft with a growth rate of nearly 6%, it tells a similar story to Apple. We have seen growth of 14%. The pace has picked up a little . Ratings remain high, and its growth rate has accelerated much more than Apple's.
It is achieving, as you know, almost double Apple's growth rate.
So, does this justify a price-to-earnings ratio of 29? Probably not. You know that an 18% growth rate with a P/E ratio of 29 is considered very high. If it returns to trading at a fair value multiple, it won't make much profit.
However, if it rises to trade at its normal price-to-earnings ratio , i.e., the five-year average, it may witness and participate in a significant amount of this company's growth. So, there is potential in that.
You know that Microsoft has almost always traded , especially recently, above this orange line, i.e., above the fair value multiple. That's undeniable, but staying above fair value opens the door to risks, doesn't it?
You are paying more for an asset than it is actually worth.
You can find other companies that are growing by 20% and trading at a lower P/E ratio than Microsoft. I mean, going back to the Nvidia example, it trades at a P/E ratio of 28, while Microsoft has a higher P/E ratio and much lower growth. Therefore, there is a risk involved.
Clearly, there is also a risk in achieving the high growth rate that Nvidia needs to make it worthwhile for investors. However, the 20% growth rate we see in Microsoft's forecast, i.e. 18.89%, is much easier to achieve than 50%.
Looking back at analysts’ estimates, we see long-term optimism compared to what it was 12 months ago, while, just as in the case of Apple, we observe a kind of neutrality, where analysts’ estimates settle and remain fixed on what they have chosen.
As we saw with Microsoft and Apple , especially Apple which is the second largest holding and is growing at only 10% annually, but has one of the highest multiples on this list, right?