Can Microsoft -- Already at 52-Week High – Turn Bing Growth into Profits?

Is Microsoft (MSFT), trading at a 52-week high, still inexpensive? Depends in part on your opinion of Bing.

The software giant's fledgling search engine finally broke into the No. 2 spot behind industry leader Google (GOOG) at the end of last year, and increased its lead over No. 3 Yahoo! (YHOO) in January, according to comScore.

Bing's marketshare was 15.2% in January, up from 15.1% in December, while Yahoo was going the other way. It's share was 14.15% in January down from 14.5% in December. In January 2011, Bing had only 13.1% of the market compared with Yahoo's 16.1%. Google remains miles ahead at 66.2% in January 2012, up from 65.9% in December 2011.

Turning Bing’s market share growth into profits – or at least smaller losses – would help Microsoft’s bottom line. Losses were more than $2.4 billion on Bing and related online services in calendar 2011.

Microsoft has seen some of its success in Bing reflected in its stock price over the past year, where it's outpaced its two other search rivals plus Hewlett-Packard (HPQ) and Oracle (ORCL).

Microsoft Corporation Stock Chart

Microsoft Corporation Stock Chart by YCharts

But a closer look at how Microsoft stacks up against its search buddies shows its outpacing them in many investor-friendly fundamentals and still is not being valued for its outperformance. Microsoft, market cap over $260 billion, has a higher profit margin than Google and Yahoo over the past five years.

Microsoft Corporation Profit Margin Chart

Microsoft Corporation Profit Margin Chart by YCharts

Microsoft’s PE is below 12. Its return on equity over the past five years puts the other two search engines to shame.

Microsoft Corporation Return on Equity Chart

Microsoft Corporation Return on Equity Chart by YCharts

And despite being 7% above its 50-day moving average and 17.5% above its 200-day average, according toYahoo Finance, it's PE ratio remains below that of not only Google and Yahoo, but also International Business Machines (IBM) and Oracle.

Microsoft Corporation PE Ratio Chart

Microsoft Corporation PE Ratio Chart by YCharts

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings, stock screener and portfolio strategies.

Read more articles about: Investing Ideas  

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