There are obvious reasons why Microsoft (NASDAQ: MSFT) is the best value investment in software. This company makes a lot of money, has a reasonable share price, and offers one of the most successful products in human history: Windows.
Windows is still the most successful operating system in the known universe. An estimated 46.63% of the desktop computers on Earth use Windows 7, according to Networkmarketshare. Another 29.26% of the world’s PCs operate on Windows 10.
That means 75.89% of the world’s desktop computers are running on just three versions of Windows. When three other versions of Windows are added, statistics indicate that 89.73% of the world’s desktops are running on Windows operating systems. The other three systems are Windows XP which as a 6.47% market share, Windows 8.1 with a 5.97% share of the market and Windows 8 with 1.4% of the market.
Microsoft Controls 90% of the Operating System Market
That means nearly 90% of the desktop computers in the world are running on Windows products. It also means that the rival operating systems are not even competitive with Microsoft’s offerings.
All of the Apple Mac OS 10 systems had a market share of 6.71% and Linux had a share of 2.98%. This means that Apple is not even big enough to be a niche player in this market. Even Linux, which is theoretically the biggest threat to Windows, is tiny.
The size of this market is vast because there an estimated two billion PCs in the world right now according to Reference.com. That means around 931 million computers are operating on Windows 7 alone. Microsoft has the largest and most diverse market for software.
Microsoft Makes an Incredible Amount of Money
These figures show us why Microsoft is incredibly profitable and generating a vast amount of cash. Some of the incredible amounts of money Microsoft reported on 30 September 2017 include:
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$138.47 billion (€117.80 billion) in cash and short-term investments. That’s right, Microsoft had nearly $140 billion (€118.90 billion) in the bank on 30 September 30, 2017. That makes it the most cash-rich nonbanking company on Earth.
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$40.40 billion (€34.31 billion) in cash from operations on 30 September 2017.
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A net income of $23.09 billion (€19.61 billion) on 30 September 2017.
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A free cash flow of $10.31 billion (€8.76 billion) on September 30, 2017.
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Assets of $249.10 billion (€211.57 billion) non 30 September 2017.
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A market capitalization of $649.72 billion (€551.82 billion) on 8 December 2017.
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An enterprise value of $583.38 billion (€495.38 billion) on December 8, 2017.
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A profit margin of 26.8% on September 30, 2017.
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Revenues of $94.04 billion (€79.87 billion) on 30 September 2017.
All those operating systems are certainly paying off for Microsoft in a big way. What’s more interesting is that this company’s business is growing despite all the reports that people are switching to smartphones and Linux.
Microsoft is growing like a Weed
The most interesting thing about Microsoft is that it is growing like a weed and making a lot of money at the same time.
For example Microsoft’s revenues grew by $7.16 billion (€6.08 billion) in the 12 months between September 30, 2016, and the same date in 2017. Microsoft reported $86.87 billion (€73.78 billion) in revenues at the end of 3rd quarter 2016, and $94.03 billion (€79.87 billion) a year later. If that growth keeps up Microsoft will report more than $100 billion (€84.93 billion) in revenues sometime next year.
Then there was the income which grew by $5.53 billion (€4.70 billion) in 12 months. Microsoft reported $17.56 billion (€14.91 billion) in income in September 2016, and $23.09 billion (€19.61 billion) a year later.
Cash from operations grew by $4.4 billion or 10% rising from $36 billion to $40.4 billion in the 12 months that ended on 30 September 2017. Cash and short-term investments increased by $1.54 billion (€1.31 billion) during the same period. The free cash flow increased by $924 million (€784.77 million) , going from $9.386 billion (€7.97 billion)to $10.31 billion (€8.76 billion) in the same period.
Finally there were the assets which grew from $212.52 billion (€180.50 billion) to $249.10 billion (€211.57 billion) during the same 12 months.
Microsoft is an Incredible Value Investment
Not only does Microsoft have an incredible amount of value, but it was very reasonably priced at $84.22 (€71.53) a share on 8 December 2017. That’s a great price for a cash-rich company with a fast-growing business.
MSFT shareholders were rewarded with a dividend of 42¢ a share on 15 November 2017. That dividend was a 3¢ (€0.03) increase over the 39¢ (€0.36) dividend paid out on May 16, 2017. Beyond the dividend; there as a 31.12% return on equity on 30 September 2017.
The bottom line is that Microsoft is a great company with a great business that makes a lot of money. It also has a really good stock that is not very sexy or glamorous. Windows is about as sexy or as appealing as an old Ford or a plate of broccoli, to today’s geeks but it makes a vast amount of money.
Therefore, Microsoft is a classic value investment that makes a lot of money. If you just need a stock that makes money and adds value to your portfolio, Microsoft would be a good choice.
This article originally appeared at Market Mad House.