Latest news with #TrefisHighQuality
Forbes
3 days ago
- Business
- Forbes
Buy MSFT Stock At $460?
23 May 2025, Bavaria, Munich: The Microsoft logo and lettering can be seen on the Microsoft ... More Deutschland GmbH headquarters building in Parkstadt Schwabing in Munich (Bavaria) on May 23, 2025. Photo: Matthias Balk/dpa (Photo by Matthias Balk/picture alliance via Getty Images) Microsoft (NASDAQ:MSFT) stock has experienced a notable increase of 16% over the last month, surpassing the S&P 500's 6% rise. This growth is primarily attributed to Microsoft's impressive Q1 earnings exceeding expectations and a positive outlook, bolstered by its dominance in cloud computing and AI, especially with significant Azure growth. However, following its recent ascent, is MSFT stock still worth buying? Yes, we believe that MSFT stock, which is currently priced around $460, offers an appealing buying opportunity. Though its present valuation is elevated compared to the benchmark index, making it susceptible to negative events, we do not see any significant reasons for concern. Our assessment stems from a thorough evaluation of Microsoft's present valuation relative to its historical operational performance and financial condition. We have examined Microsoft against key criteria: Growth, Profitability, Financial Stability, and Downturn Resilience. This evaluation indicates a robust operational performance and financial status, which we will explain in more detail below. That being said, if you are looking for upside potential with lower volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative — it has outperformed the S&P 500 and achieved returns exceeding 91% since its launch. Separately, see – Nvidia Stock's 1 Big Risk Based on the price you pay per dollar of sales or profit, MSFT stock appears overpriced in relation to the broader market. Microsoft's Revenues have experienced significant growth in recent years. Microsoft's profit margins are significantly higher than those of most companies in the Trefis coverage universe. Microsoft's financial position is very solid. MSFT stock has experienced an impact that was slightly more favorable than the benchmark S&P 500 index during some recent downturns. Concerned about how a market crash might affect MSFT stock? Our dashboard How Low Can Microsoft Stock Go In A Market Crash? provides a comprehensive analysis of how the stock fared during and after previous market crashes. In conclusion, Microsoft's performance across the evaluated criteria is as follows: Microsoft has showcased strong performance in key financial metrics. Although its current valuation seems elevated compared to the broader market, it is consistent with Microsoft's own historical performance. For example, the current price-to-sales (P/S) ratio of 12.6x aligns with its 12.4x average over the past four years. Similarly, the price-to-earnings (P/E) ratio of 35x is in line with the stock's average P/E during the same timeframe. Looking forward, significant growth in Azure is expected to fuel further increases in valuation multiples. The company's revenue growth over the next three years is projected to average in the low double-digits, compared to a 12% average over the preceding three years. Overall, despite its recent increases, we believe MSFT stock continues to be an attractive buy at current levels. In fact, we estimate Microsoft's valuation to be $535 per share, indicating over 15% upside potential. Nevertheless, it is vital to recognize potential risks. A downturn in economic growth or a recession could result in decreased corporate investments in infrastructure, potentially affecting Microsoft's revenue growth. Even though MSFT stock has historically performed better than the benchmark index during economic downturns, a decline in its stock price during such situations cannot be dismissed. Not entirely satisfied with the volatile nature of MSFT stock? The Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has a proven history of consistently outperforming the S&P 500 over the past four years. What accounts for this? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index; a more stable investment experience, as demonstrated by HQ Portfolio performance metrics.
Forbes
4 days ago
- Business
- Forbes
More Upside For Veeva Stock?
CHONGQING, CHINA - MAY 25: In this photo illustration, the logo of Veeva Systems Inc. is displayed ... More on a smartphone screen, with the latest stock market chart of the company in the background, reflecting investor sentiment and recent trading activity, on May 25, 2025, in Chongqing, China. (Photo Illustration by) Veeva Systems (NYSE: VEEV) stock, a cloud-based software firm, surged 16% in after-hours trading on May 28, following a strong performance in Q1 fiscal year 2026 (Jan. year). The company reported earnings of $1.97 per share on revenue of $759 million, surpassing consensus estimates of $1.74 and $728 million, respectively. Overall sales growth was 17% year-over-year, with subscription services revenue growing even faster at 19% to $635 million, exceeding market expectations of $616 million. This robust Q1 performance has prompted several prominent research firms to raise their price targets for VEEV stock. While Veeva's Q1 results were undoubtedly solid, leading to a significant jump in its stock price, the critical question now is whether VEEV stock is a buy at levels around $275. We believe VEEV appears attractive but trades at lofty valuations, making it a challenging investment at its current price of around $270. Although there's minimal underlying concern for the stock, its extremely high current valuation makes it highly susceptible to adverse market events. This assessment is based on a comprehensive comparison of VEEV stock's current valuation against its recent operating performance and its historical and present financial condition. Our analysis of Veeva Systems across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that the company demonstrates very strong operating performance and financial health. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. When considering the price paid per dollar of sales or profit, VEEV stock appears very expensive compared to the broader market. Veeva Systems has a price-to-sales (P/S) ratio of 16, significantly higher than the S&P 500's figure of 3.0. Additionally, the company's price-to-free cash flow (P/FCF) ratio stands at 41, compared to 20.5 for the S&P 500. Furthermore, its price-to-earnings (P/E) ratio is 58.1, while the benchmark's is 26.4. These high valuation multiples can be attributed to the company's robust profitability, discussed below. Veeva Systems' revenues have experienced notable growth in recent years. Its top line has grown at an average rate of 14.1% over the last three years, in contrast to a 5.5% increase for the S&P 500. Moreover, its quarterly revenues in the most recent quarter grew by 17% to $759 million, up from $650 million a year ago, outperforming the S&P 500's 4.8% improvement. For the last twelve months period, Veeva's revenue stood at $2.9 billion. Veeva Systems' profit margins are considerably higher than most companies in the Trefis coverage universe. The company's operating income over the last four quarters was $770 million, representing a high operating margin of 27% compared to 13.2% for the S&P 500. Veeva Systems' operating cash flow (OCF) during this period was $1.2 billion, indicating a high OCF margin of 42.2% versus 14.9% for the S&P 500. Finally, for the last four-quarter period, Veeva Systems' net income was $781 million, pointing to a considerably high net income margin of 27.3% compared to 11.6% for the S&P 500. Veeva Systems' balance sheet appears very strong. At the end of the most recent quarter, Veeva Systems' debt stood at $77 million, while its market capitalization was $38 billion (as of May 28, 2025). This implies a very strong Debt-to-Equity Ratio of 0.2%, significantly lower than the S&P 500's 19.9% (a low Debt-to-Equity Ratio is desirable). Furthermore, cash (including cash equivalents) constitutes $4.1 billion of Veeva Systems' $7.8 billion in total assets, yielding a very strong Cash-to-Assets Ratio of 52.8% compared to 13.8% for the S&P 500. VEEV stock has fared worse than the benchmark S&P 500 index during some recent downturns. While investors hope for a soft landing by the U.S. economy, it's worth considering how severe things could become in another recession. Our dashboard, "How Low Can Stocks Go During A Market Crash," illustrates how key stocks performed during and after the last six market crashes. During the Inflation Shock of 2022, VEEV stock fell 55.7% from a high of $341.00 on August 5, 2021, to $151.10 on October 14, 2022, while the S&P 500 experienced a peak-to-trough decline of 25.4%. The stock has yet to recover to its pre-crisis high, with its highest point since then being $250.45 on December 8, 2024, and currently trading at around $235 (May 28). During the Covid Pandemic in 2020, VEEV stock fell 26.8% from a high of $341.00 on August 5, 2021, to $249.49 on December 3, 2021, whereas the S&P 500 saw a peak-to-trough decline of 33.9%. Similar to the Inflation Shock, the stock has yet to recover to its pre-crisis high. In summary, Veeva Systems has demonstrated very strong performance across all the detailed parameters. This robust performance is reflected in the company's expensive valuation, trading at 16 times trailing revenues and 58 times trailing earnings. While this valuation might be justifiable given Veeva's solid profitability and its long-term outlook of doubling revenues by 2030, we believe the potential upside may be limited from current levels. Therefore, investors considering an entry into VEEV stock might find it more advantageous to await a pullback before making a purchase. Not too happy about the volatile nature of VEEV stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Forbes
6 days ago
- Business
- Forbes
Should You Buy AVGO Stock At $230?
SUQIAN, CHINA - MARCH 9, 2025 - An illustration photo shows the Broadcom LOGO displayed on a ... More smartphone in Suqian, Jiangsu province, China on March 9, 2025. (Photo credit should read CFOTO/Future Publishing via Getty Images) Broadcom (NASDAQ:AVGO) stock is up nearly 45% in the last six months, significantly outperforming the broader Nasdaq index, down 1%. This strong performance is largely due to the company's rising sales, up 40% in the last twelve months. A major driver of this growth is Broadcom's AI product line, which saw an impressive 220% year-over-year increase in revenue to $12.2 billion in fiscal year 2024, fueled by high demand for its custom AI accelerators (XPUs) and Ethernet products. Broadcom is strategically positioned to capitalize on the generative AI surge with its extensive suite of networking, storage, cybersecurity, and semiconductor offerings. Considering this strong performance, we believe AVGO stock is a good buy at its current price of around $230. While its current valuation is extremely high, making it sensitive to adverse events, we see minimal cause for concern. Our conclusion is based on comparing AVGO's current valuation with its recent operating performance and its current and historical financial health. Our analysis across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—shows that Broadcom has a very strong operating performance and financial condition. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Also, see – Should You Buy MRK Stock At $80? Going by what you pay per dollar of sales or profit, AVGO stock looks very expensive compared to the broader market. Broadcom's Revenues have grown considerably over recent years. Broadcom's profit margins are much higher than most companies in the Trefis coverage universe. Broadcom's balance sheet looks strong. AVGO stock has been less resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes. In summary, Broadcom's performance across the parameters detailed above are as follows: AVGO stock has performed exceptionally well across these parameters. While the stock's valuation is currently high, it appears justifiable given its massive sales growth and solid operating cash flow margins of around 40%. Therefore, despite its extremely high valuation, the stock remains attractive, supporting our conclusion that AVGO is a good buy. However, investors should be aware of certain risks. The stock's high valuation makes it more prone to significant declines during adverse events, as demonstrated by its larger corrections than the broader market in two of the last three market crashes. Additionally, any slowdown in AI spending by companies would directly impact Broadcom's growth. Overall, investors should carefully consider these potential risks before investing in AVGO. Not too happy about the volatile nature of AVGO stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Forbes
23-05-2025
- Business
- Forbes
Why Buy Microsoft Stock?
Microsoft store in Manhattan, New York City, United States of America on July 16th, 2024. (Photo by ... More Beata Zawrzel/NurPhoto via Getty Images) Why would you want to pay 50x cash flow for Microsoft's (NASDAQ:MSFT) stock, when you can buy Nvidia at about the same price? Nvidia's revenues are growing close to 100%, Microsoft's at 15%. Yes, not 50%, but 15%. What's worse - Nvidia's cash flow margins are about 47%, almost 1.7x Microsoft's margins. In other words, more of that top line growth that Nvidia gets - makes its way to free cash flow! Cash that can be reinvested or distributed to investors as return. Good thing, who can argue? But Nvidia comes with large risk. Our High Quality (HQ) portfolio diversifies away stock-specific risks while giving exposure to upside, and has outperformed the S&P 500, the Nasdaq, and Russell 2000 - and has clocked > 91% returns since inception. Well, you could argue - Microsoft is a known, stable game. For more than 40 years, this thing has been running like a machine. Nvidia's phenomenal growth is recent - it might fizzle. AI might fizzle. Large AI models might fizzle - or worse, deemed unnecessary. Deepseek showed small models work just as well, right? They didn't even use Nvidia's latest chips. However, what are the odds that Nvidia's chips will cease to be the hottest date in town? There lies the guesswork. Nvidia revenues grew more than 80% annually, on average, in the last 3 years - and last year grew more than 100%. Could this drop to 60% or 40% growth? It has to - soon! Nvidia's biggest customers are the likes of Microsoft, Google, Meta, and Amazon. These companies, each of them, spent more than tens of billions last year on Nvidia chips. Can Microsoft, Google, and others continue to spend 100% MORE on Nvidia chips next year? And the year after? Can they do it while their own revenue grows only 15% annually? The answer is absolutely not. The Nvidia 80-100% growth music has to stop at some point. When this high pitched growth music stops, Nvidia's valuation will drop. A lot. But then, it might continue at a slower pace, at 20-30%, not bad, but not ridiculously high either. That's why you build a portfolio. A resilient one. Balance risk-reward. We did it in spades with the Trefis High Quality (HQ) portfolio. Balancing risk-reward is how HQ outperformed the S&P 500, the Nasdaq, and Russell 2000. HQ outperformed all of them, and clocked >91% returns since inception. That's why you buy a little bit of Microsoft, or Google, META, and Amazon. Comparison as a tool: The purpose of comparing Microsoft with Nvidia is all about understanding the risk-reward tradeoff of an investment of interest, in this case Microsoft. In practice, investment decisions are about understanding relative attractiveness. Buy Microsoft stock or keep your money as interest earning cash? Or buy an ETF on the S&P 500? Is expected return on Microsoft stock more than that on cash - by how much? What's the downside risk you bear to earn that extra return on Microsoft? Drawing contrast with a specific 'anchor' asset, in this case Nvidia and Microsoft, serves as a powerful tool to assess the risk-reward tradeoff. Note: Always use an appropriate comparison for a ticker. Microsoft example was about 'growth' and reasonably high valuation. A comparison with Nvidia provides interesting perspective as the stock offers much more at a similar valuation (FCF based) - but also carries with it, a huge downside risk. It is exactly this downside risk, versus relative upside tradeoffs we made - at scale, in constructing the Trefis High Quality (HQ) Portfolio. With a selection of 30 stocks, it has demonstrated a history of comfortably outperforming the S&P 500 over the past 4-year span. What accounts for this? As a collective, HQ Portfolio stocks achieved superior returns with reduced risk compared to the standard index, with a smoother performance evident in HQ Portfolio performance metrics.
Forbes
21-05-2025
- Business
- Forbes
Will Ross Stores' Q1 Earnings Drive Stock Growth?
Photo by Artur Widak/NurPhoto via Getty Images Ross Stores (NASDAQ: ROST) is set to announce its fiscal first-quarter earnings on Thursday, May 22, 2025, with analysts forecasting earnings of $1.43 per share and $4.96 billion in revenue. This would indicate a 3% decrease in earnings year-over-year and a 2% increase in sales compared to last year's figures of $1.47 per share and $4.86 billion in revenue. Historically, ROST stock has risen 50% of the time after earnings announcements, with a median one-day gain of 3.6% and a maximum observed increase of 10%. Ross Stores, a pioneer in off-price retail, leverages surplus inventory to provide significant brand discounts. Recently, it expanded its number of stores, aiming at value-focused shoppers while enhancing operations. Its 'packaway' approach facilitates prompt inventory deployment, enhancing its competitive pricing. For this fiscal year, Ross anticipates a flat to 3% decrease in comparable store sales for the first quarter, attributing this to cautious macroeconomic conditions. Management foresees full-year EPS to be between $5.95 and $6.55, which is a slight decrease from $6.32 recorded the previous year, reflecting persistent competitive pressures. With a market capitalization of $51 billion, Ross reported $21 billion in revenue over the last 12 months, yielding $2.6 billion in operating profit and $2.1 billion in net income. For event-driven traders, historical trends may provide a competitive advantage, whether by positioning before earnings or responding to movements after the release. Nonetheless, if you desire less volatility along with growth relative to individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and delivered returns surpassing 91% since its launch. See earnings reaction history of all stocks. Some insights regarding one-day (1D) post-earnings returns: Additional statistics for recorded 5-Day (5D) and 21-Day (21D) returns post earnings are compiled along with the data in the table below. ROST Post Earnings Forward Returns A comparatively less risky strategy (although not effective if the correlation is low) involves analyzing the correlation between short-term and medium-term returns following earnings, identifying a pair with the strongest correlation, and executing the suitable trade. For instance, if 1D and 5D exhibit the strongest correlation, a trader may take a 'long' position for the subsequent 5 days if the 1D post-earnings return is positive. Below is some correlation data derived from 5-year and 3-year (more recent) history. Please note that the correlation 1D_5D represents the relationship between 1D post-earnings returns and subsequent 5D returns. ROST Correlation Between 1D, 5D and 21D Historical Returns Discover more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (a combination of all three, S&P 500, S&P mid-cap, and Russell 2000), leading to strong returns for investors.
