When profit catches up with stock price

Article Excerpt

MICROSOFT CORP. $29 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 9.8 billion; Market cap: $284.2 billion; WSSF Rating: Above average) is the world’s largest maker of computer software. Its Windows operating system runs about 80% of the world’s computers, while its Office suite of programs dominates the business software market. Sales grew from $28.4 billion in 2002 (fiscal years end June 30) to $44.3 billion in 2006, or 11.8% compounded annually. Profits rose from $0.94 a share (total $10.4 billion) in 2002 to $1.20 a share ($12.6 billion) in 2006. Microsoft spends 15% of its revenue on research, so it’s more profitable that it appears. The stock has stayed in a narrow range in the past few years, due to its anti-trust problems and slowing sales growth. But Microsoft’s profits have caught up with its stock price, and its new products enhance its long-term prospects. New products broaden its profit base Microsoft launched the Xbox video game player in…

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