Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at Microsoft (Nasdaq: MSFT), Fool style.

Foolish facts



CAPS rating (out of 5) ***
Total ratings 14,512
Percent bulls 86.7%
Percent bears 13.3%
Bullish pitches 2,457 out of 2,997
Highest-rated peers Radiant Systems, Oracle (Nasdaq: ORCL), MICROS Systems

Data current as of Dec. 28.

Few stocks generate a bigger divide than Microsoft. Most Fools either love Mr. Softy's valuation, or hate its market position. But don't take my word for it. Here are two dueling CAPS pitches, from two of my favorite Fools.

"OK, I'm sold. T2 Partners' recent excellent presentation on Microsoft bas cause me to see how this company can easily beat the S&P 500 over the next several years ... We have a company that's currently trading at around 12 times its trailing earnings. Using T2's assumption of $2.40/share in earnings for 2011 and assigning the current multiple to that we arrive at a price per share of $33, an [18%] increase from today's price ... not including the dividend," wrote TMFDeej in July.

"I have great admiration for the achievement that was Microsoft in the Bill Gates era. It was in its time a tremendous Rule Breaker, and a model example of a company that really understood how to build a business model based on customer convenience. This was the golden age of Microsoft. The problem is, that was a couple decades ago. The world has changed, and not in a way that favors Microsoft either in the present or, I think, the future," wrote TMFSpiffyPop, aka Fool co-founder David Gardner, in September.

Looking back to look forward
In many ways, the year's big Microsoft stories at Fool.com reflect these divergent views. Fools can't agree on whether Mr. Softy is poised to grow or wilt:

Looking at Microsoft's financial performance, I can understand why the bulls are buying:


Q2 2010

Q3 2010

Q4 2010

Q1 2011

Revenue growth 14.4% 6.3% 22.4% 25.3%
Normalized net income growth 64.9% 11.2% 31.3% 53.3%
Gross margin 80.9% 81.0% 80.2% 80.6%
Return on capital 44.0% 26.3% 29.0% 32.4%

Source: Capital IQ, a division of Standard & Poor's.

And here's what analysts expect from Microsoft over the next two years, according to data compiled by Capital IQ:




Revenue estimate $68,151 million $73,240 million
Normalized profit per share estimate $2.43 $2.68

Source: Capital IQ, a division of Standard & Poor's. Data current as of Dec. 28.

Foolish outlook: bullish
Far as I can tell, Microsoft's best days are behind it. But that doesn't mean that those Fools who see value in Mr. Softy are wrong. This stock could very easily be a short-term market beater. I've rated it as such in my CAPS portfolio.

Now it's your turn to weigh in. What do you think of Microsoft's prospects at current prices? Leave a comment in the box below to explain your thinking. You can also join me in rating Microsoft in Motley Fool CAPS.

What will be next year's best stock? The Motley Fool has created a brand new free report called "The Motley Fool's Top Stock for 2011." In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here – it's free.

Interested in more info on the stocks mentioned in this story? Add Microsoft, Oracle, Netflix, Apple, Adobe Systems, Google, or Yahoo! to your watchlist.

Google and Microsoft are Motley Fool Inside Value picks. Google is also a Motley Fool Rule Breakers recommendation. Adobe Systems, Apple, and Netflix are Motley Fool Stock Advisor selections. Motley Fool Options has recommended subscribers open a diagonal call positions in Adobe and Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and stock positions in Google and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple, Google, Microsoft, and Oracle and is also on Twitter as @TheMotleyFool. When it comes to stocks, the Fool's disclosure policy is a lookie-loo.