Microsoft Corp. (NASDAQ:MSFT)

The common stock valuation ratios exhibit varied trends over the observed period, spanning from September 2020 to December 2025. Generally, the ratios demonstrate fluctuations, with periods of increase followed by declines, suggesting a dynamic market perception of the company’s value. A notable shift in valuation metrics is observed around the March 2022 timeframe, potentially reflecting broader economic conditions or company-specific events.

Price to Earnings (P/E) Ratio

The P/E ratio initially increased from 33.95 in September 2020 to a peak of 35.22 in March 2021, before declining to 30.38 by December 2021. It then experienced another increase, reaching 36.78 in December 2023, followed by a decrease to 29.99 in March 2024. The ratio concludes the period at 29.99 in March 2025, indicating a return towards levels seen earlier in the observation window. This suggests earnings growth may not have consistently kept pace with stock price appreciation, or that investor sentiment regarding future earnings has shifted.

Price to Operating Profit (P/OP) Ratio

Similar to the P/E ratio, the P/OP ratio generally trended upward from 28.71 in September 2020 to 31.35 in September 2021. A subsequent decline to 24.66 by March 2022 is evident, followed by a recovery to 30.20 in December 2023. The ratio then decreased to 25.09 in March 2025. This pattern mirrors the P/E ratio, indicating a correlation between profitability and stock valuation. The decline from 2023 to 2025 suggests operating profit growth may have slowed relative to the stock price.

Price to Sales (P/S) Ratio

The P/S ratio exhibited a consistent increase from 10.96 in September 2020 to a high of 13.70 in March 2023. A subsequent decrease to 11.71 in March 2025 is observed. This suggests that the market was initially willing to pay a higher premium for each dollar of sales, but this premium has diminished over time. The overall trend indicates a potential shift in investor expectations regarding revenue growth.

Price to Book Value (P/BV) Ratio

The P/BV ratio increased from 13.07 in September 2020 to 15.32 in September 2021, then decreased to 9.84 by December 2022. It fluctuated between 10.52 and 12.74 through 2023 and 2024, concluding at 9.15 in March 2025. This indicates a decreasing market valuation of the company’s net assets. The decline suggests investors may be placing less emphasis on the company’s book value as a measure of its worth, or that the market perceives a diminishing return on equity.

In summary, the valuation ratios suggest a period of increasing optimism followed by a moderation in investor sentiment. The declines observed in most ratios from late 2023 into early 2025 warrant further investigation to determine the underlying causes and potential implications for future performance.

The price-to-earnings (P/E) ratio for the observed period demonstrates a fluctuating pattern, generally remaining within a range of approximately 26 to 37 over the analyzed timeframe. Initial values in late 2020 and early 2021 indicate a P/E ratio around 34, suggesting a relatively consistent valuation. A subsequent decline is observed through the first half of 2022, reaching a low of approximately 26.7, before experiencing a moderate increase towards the end of 2022 and into the first half of 2023. A more pronounced increase occurs in late 2023, peaking at 36.78, followed by a slight decrease and stabilization in the first half of 2024. The latter half of the period shows increased volatility, with a dip to 30.40 in early 2025, followed by a significant rise to 37.46 and 38.37, before concluding with a decrease to 29.99.

Overall Trend

The P/E ratio exhibits a generally stable pattern with periods of increase and decrease. While there isn't a clear, sustained upward or downward trend across the entire period, the ratio demonstrates increased fluctuation in the later years, particularly from 2023 onwards. The most recent values suggest a potential return towards lower P/E levels.

Early Period (Sep 2020 – Jun 2021)

The P/E ratio remained relatively consistent, fluctuating between 33.95 and 35.22. This suggests a period of stable investor sentiment and valuation. The slight variations within this range are likely attributable to short-term market dynamics and earnings fluctuations.

Mid-Period (Jul 2021 – Dec 2022)

A noticeable downward trend is observed during this period, with the P/E ratio decreasing from 34.30 to 26.71. This decline could be indicative of increasing earnings relative to the share price, or a shift in investor expectations. The lowest point of 26.71 in September 2022 represents a period of comparatively lower valuation.

Recent Period (Jan 2023 – Jun 2025)

The P/E ratio demonstrates increased volatility. A significant increase from 29.67 in March 2023 to 36.78 in December 2023 is followed by fluctuations, peaking at 38.37 in March 2025 before decreasing to 29.99 in June 2025. This suggests a period of heightened market sensitivity and potentially changing investor perceptions regarding future earnings potential.

The observed fluctuations in the P/E ratio warrant further investigation into underlying factors such as earnings growth, market conditions, and investor sentiment. The recent volatility suggests a more dynamic valuation environment compared to the earlier, more stable period.

The Price to Operating Profit (P/OP) ratio for the observed period demonstrates a generally stable, albeit fluctuating, pattern. Initially, the ratio exhibited an increasing trend from September 2020 through September 2021, followed by a notable decline at the end of 2021. Subsequent periods show continued variability, with a general tendency towards stabilization in the mid-20s before another increase in late 2024 and early 2025.

Initial Increasing Trend (Sep 2020 – Sep 2021)

From September 2020 to September 2021, the P/OP ratio increased from 28.71 to 31.35. This suggests that the market valuation, relative to operating profit, was increasing during this period. This could be attributed to positive investor sentiment, expectations of future growth, or broader market conditions.

Subsequent Decline (Dec 2021 – Sep 2022)

A significant decrease in the P/OP ratio occurred between December 2021 and September 2022, falling from 27.51 to 22.07. This decline indicates that the share price decreased relative to operating profit, potentially reflecting concerns about future performance or a correction in market valuation. The most substantial drop occurred between March 2022 and September 2022.

Stabilization and Re-increase (Sep 2022 – Jun 2025)

Following the decline, the P/OP ratio experienced a period of relative stabilization, fluctuating between approximately 22 and 29.68 through March 2025. A renewed increase is observed in the final two periods, reaching 29.68 in June 2025 and 30.29 in September 2025. This recent increase suggests a potential shift in investor perception or improved financial performance expectations.

Correlation with Share Price and Operating Profit

The P/OP ratio’s movements correlate with both the share price and operating profit per share. Increases in the ratio generally coincide with increases in share price and/or decreases in operating profit per share, and vice versa. The period from December 2021 to September 2022 exemplifies this, where a declining share price and relatively stable operating profit contributed to the ratio’s decrease.

Overall, the P/OP ratio demonstrates a dynamic relationship with underlying financial performance and market sentiment. While exhibiting fluctuations, the ratio generally remained within a defined range throughout the observed period, with a recent indication of increasing valuation relative to operating profit.

The price-to-sales (P/S) ratio for the observed period demonstrates a generally increasing trend from September 2020 through September 2021, followed by a period of fluctuation and a subsequent rise towards the end of the observation window. Initial values indicate a P/S ratio around 10.96, peaking at 13.21, before experiencing a decline and then resuming an upward trajectory.

Initial Growth Phase (Sep 30, 2020 – Sep 30, 2021)

The P/S ratio exhibited consistent growth, increasing from 10.96 to 13.21. This suggests a growing investor confidence in the company’s ability to generate sales relative to its market capitalization during this period. The increase occurred alongside rising share price and sales per share.

Period of Volatility (Dec 31, 2021 – Sep 30, 2022)

Following the peak in September 2021, the P/S ratio experienced a notable decline to 8.83 by December 2022. This decrease coincided with a decrease in share price. While sales per share continued to increase, the rate of increase did not offset the impact of the share price decline on the P/S ratio. The ratio showed some recovery towards the end of this period, reaching 9.20 in September 2022.

Subsequent Increase (Dec 31, 2022 – Jun 30, 2025)

From December 2022 through June 2025, the P/S ratio generally increased, reaching a high of 13.70 in March 2025. This upward movement was driven by a combination of increasing share price and continued growth in sales per share. The ratio experienced a slight decline to 11.71 in March 2025, but rebounded to 13.54 by June 2025. This suggests renewed investor optimism and a willingness to pay a higher premium for each dollar of sales.

Overall, the P/S ratio demonstrates sensitivity to both share price and sales per share. The fluctuations observed suggest that investor sentiment and expectations regarding future sales growth play a significant role in the company’s valuation. The recent upward trend indicates a positive outlook, but continued monitoring is warranted to assess the sustainability of this trend.

The price-to-book value (P/BV) ratio for the observed period demonstrates a generally decreasing trend, punctuated by periods of fluctuation. Initially, the ratio exhibited an upward trajectory from September 2020 through September 2021, followed by a more volatile pattern over the subsequent quarters.

Initial Increasing Trend (Sep 2020 – Sep 2021)

The P/BV ratio increased from 13.07 in September 2020 to 15.32 in September 2021. This suggests a growing investor confidence in the company’s ability to generate value relative to its book value during this period. The share price increased at a faster rate than the book value per share.

Subsequent Volatility and Decline (Dec 2021 – Dec 2022)

From December 2021 to December 2022, the P/BV ratio experienced considerable volatility, declining from 13.52 to 9.84. This period saw a decrease in the ratio, indicating that the market valuation of the company’s equity diminished relative to its book value. The share price decreased more rapidly than the book value per share.

Recovery and Stabilization (Mar 2023 – Jun 2025)

Starting in March 2023, the P/BV ratio showed a recovery, rising to 11.92, before fluctuating between approximately 9.13 and 11.11 through June 2025. While not returning to the highs seen in 2021, this suggests a stabilization in investor sentiment. The book value per share consistently increased throughout this period, while the share price experienced more moderate fluctuations.

Overall, the P/BV ratio demonstrates a shift from a period of increasing valuation to one of relative decline and eventual stabilization. The most recent data point, June 2025, shows a P/BV ratio of 11.11, which is lower than the peak in September 2021 but higher than the trough in December 2022. This suggests a moderate level of investor confidence in the company’s valuation relative to its book value at the end of the observed period.

Book Value Per Share Trend

The book value per share consistently increased throughout the entire period, rising from US$16.32 in September 2020 to US$52.64 in June 2025. This indicates a steady growth in the company’s net asset value attributable to each share.

Share Price Trend

The share price also generally increased over the period, but with greater volatility than the book value per share. It rose from US$213.25 in September 2020 to US$513.24 in June 2025, experiencing peaks and troughs along the way.