12-Month Net Income Growth: 50%
Quarterly Operating Profit Margin: 44%
Cash Flow Multiple: 8.9 (53% peer discount)
Analysts' Median Target: $32.99
3-Year Dividend Growth: 10%
Dividend Yield: 2.3%
Payout Ratio: 24%
2011 Catalyst: Microsoft is one of the most compelling value stocks in the market. It has the strongest brand name in software, lofty margins, with a gross spread of 85%, and an obscene coffer for acquisitions. The Redmond, Wash.-based company held $44 billion of cash and equivalents at its fiscal first-quarter's end and less than $11 billion of debt, for a net liquidity position of $34 billion, plenty for acquisitions. Its quarterly return on equity rose to 44%, more than doubling the industry average. Return on assets hit 23%, indicating superlative efficiency. Despite such attractive metrics, Microsoft sells for just 10-times forward earnings, a 59% industry discount. Bullish Scenario: Stifel Nicolaus projects a $40 share price, implying 46% upside. Bearish Scenario: FBR Capital Markets expects Microsoft's stock to rise marginally to $28.