Microsoft (MSFT 1.82%) shares have performed well through the past few years, beating the rally in the wider market. But there's still a compelling thesis for buying this stock now.
In this video from "The Virtual Opportunities Show" recorded on Jan. 25, Fool contributor Demitri Kalogeropoulos breaks down Microsoft's latest earnings report and lists a few reasons why the stock looks attractive today.
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Demitri Kalogeropoulos: I'm going to talk about a little company called Microsoft. You might have heard of. For a couple of reasons, I like the stock when you mentioned stocks have got cheaper. Lately, Microsoft has not underperformed the market at all by any stretch.
Let's say over the past year, the stocks up about 27 percent are almost double the S&P is 13 percent. But year-to-date, since just in this month here, last 21 days or so, the stocks down about 15 percent. It has got a little cheaper.
They just reported earnings about two hours ago, actually four o'clock. Let me go ahead and share a little bit of one of their investor slides to summarize. Let's see if that's going to show up. Coming through for you hopefully. Just really great numbers. Sales were up 20 percent year-over-year to $52 billion. A year ago was about 41 billion something.
You're adding around $11 billion in revenue in just this quarter. It's a big company, but it's still growing a lot. That 20 percent number is a little bit better than they had predicted and that most people were expecting. You know some of these numbers, I know you guys are just going to have them in this gross margin number. Gross profit grew faster than sales a bit. That gross margin percentage is 67 percent operating income. It's just such a cash generating machine. Operating income is over $22 billion up 24 percent and their operating margin rose. I'm excited when I see an operating margin over 20 and this is 43 percent of sales and is getting bigger, is 42 a year ago. Just generating tons and tons of cash.
I like that stock for that reason and the fact that has gotten cheaper. It does pay a dividend too which I really like a small dividend. Of course, yield is less than one percent and you're not going to buy it because it's a dividend stock, but it's definitely management is very interested in returning cash to shareholders they spent, let me say something like 20. Yeah, so cash flow is up to $15 billion from 12-and-a-half in the last year and they've repurchased about $15 billion of their stock over the last six months.
They're really returning a lot of that cash and they can still invest a ton into the business, so a lot of things I like to see in a stock. Shares were initially down right after the earnings report came out by about five percent and somehow they've jumped into positive territory, but they're up about two percent right now. That might be because everyone is waiting on the updated outlook. It doesn't come in their normal release that they talk about it in their conference call, so it might have been a positive outlook.
But either way, this is a great company, it's definitely one I'm looking to. I owned it a while back and I sold it. I'm kicking myself for doing that, so I'm looking forward to getting back into this at a cheaper price.
