Ranking The Mag 7 Based On Valuation

Hinzugefügt: 2026-06-01

[00:00:00]Hello everybody. Welcome back to another valuation investing video. And today in this video, I'm going to be ranking the MAG7 stocks based off of their valuation. So with that being said, guys, in this tier ranking, it's going to be purely on the valuation, not necessarily the fundamentals of the business. That's going to factor into our intrinsic value calculations. But I'm not talking about the quality of the business itself. I'm talking about purely on the free cash flows and net income and based on future assumptions.

[00:00:31]Do I think the stock looks undervalued right now? So, with that being said, let's take a look at what my rankings are going to look like. If we take a look at my rankings for the MAG 7, this is what I have here. So, I have the overvalued category, fair valued, undervalued, and buy now category. So basically overvalued category means we're going to def I think we would probably make less than the market average of 8 to 10%. Fairvalued I expect to basically match the past performance of the stock market. Undervalued I think you can outperform the market by a little bit and buy now means I think you guys should be buying the stock right now based on purely the valuation. So, with that being said, the first stock we're going to be taking a look at here is Microsoft. When taking a look at Microsoft here on the forecaster.biz website, guys, look at the past 6 months. The stock's down 12% yet the market's up about 12%. So, Microsoft is very underperforming compared to the stock market right now. If we take a look at the PE ratio, it's the price divide by the earnings per share. What that basically means is how much you are paying for $1 of earnings per share. So they're trading right now as we can see with the past 5 years at about 24 trailing 12 month PE ratio. What that means is you're paying about 24 $25 for $1 of earnings per share. Right now the market average is about 25 to 28. So Microsoft's trading at about the market average. If we take a look at its past averages, it is trading at one of its cheapest valuations. So on surface level, this looks like a pretty cheap valuation for a great company like Microsoft. I also want to show you guys just the fundamentals quickly with Microsoft here. Look at the growth numbers from this company. Revenue growth continuing to grow very good.

[00:02:23]This is what we love to see. Growing 18% in their most recent quarter, year-over-year. That's very good. Also, if we take a look at the net income, we can see the growth numbers looking pretty good, 23%. So this looks very good for Microsoft. I do want to point one thing out though with Microsoft here. As we can see in the last quarter, not this third quarter, the second quarter, we saw 60% net income growth, which if we take a look at the annual numbers, you can see we saw seen an huge increase in the trailing 12 months net income growth. The reason for this is because of unrealized gains with open AI. So in reality, this net income here was overexaggerated.

[00:03:02]And when you take that into account, technically the PE ratio that we saw earlier of about 25 in this chart is also technically underexaggerated.

[00:03:14]In reality, they're trading at a higher PE ratio than what it says here because those aren't actual net income gains that they realize. Those are unrealized that you have to put on the income statement with the accounting principles. So in reality, this P ratio is actually like 28.

[00:03:32]So it is actually a little bit more overvalued than Surface Level. So just keep that in mind with Microsoft going forward. But nonetheless, everything looks good here. They're also buying back a decent amount of shares each year. So the company overall is a great fundamental business. Obviously, Microsoft has a lot of different products. If you don't know what they are, Microsoft owns all the 365 products. You have Word, you have all the PowerPoint stuff, all that good stuff with basically if you're in an office, you're probably going to be using Microsoft. They also own anything almost to do with gaming, Xbox, Activision, Blizzard, they own a lot of gaming segments. The main growth driver right now though for Microsoft is the Azure, which is the cloud service of this business. So that's another segment of this company. And there's a lot more.

[00:04:21]or you have like LinkedIn that's a huge social technically social media I guess you could say social media platform it's just a great platform that people underrate that is the main businesses around Microsoft there's so much more that I could get into but I don't want to make this video very long so with my intrinsic value calculations for Microsoft this is what I'm assuming for the future 13% revenue growth I think that's definitely achievable with this company analyst expect near 15% so I'm being a little bit more conservative For the future PE ratio, I'm assuming a 27.

[00:04:53]That's about their average, a little bit under their average. So, I think that's fair for a company growing very well and also one of the best companies on Earth.

[00:05:01]Future profit margin, I expect it to be what it is about today. And I expect them to buy back very slightly in the upcoming years. When I press calculate, I get about a 14.4% return at today's price. So, with that in mind, guys, normally I would say 15 plus% is a buy now category. I think right now at about $420, the stock is in the undervalued category. It is very close to the buy now. You can put that into the buy now category, but with how I'm basically having these rankings, it's going to go into the undervalued category. But nonetheless, I do own the company at about $400 or so dollars, that is where I would put the buy now category at. But right now, as of today, it is slightly out of the buy now category. So, we're putting it in undervalued. The next company we're going to be taking a look at is one that basically everybody knows these companies, but I think Apple might be the most known. Apple, obviously, if you don't know, they have the iPhone. A lot of people use that. They have all their devices. They also have their ecosystem in terms of the app store where they make huge amount of service revenue on that. And they have so much other things, AirPods, Apple watches.

[00:06:10]This company is just a juggernaut in terms of these devices. And as we can see here, this is our next ranking. When taking a look at Apple, guys, this year the stock's up about 14%. So, it's performing about market average right now. Look at this. Over the past 10 years, this stock has been rallying so much. But I want to show you guys with the PE ratio. This stock isn't necessarily just going up purely from earnings. It's also from multiple expansion. As we can see, this company when Warren Buffett was buying back into the 2010s, it was trading at a 1314p ratio. That is an insanely cheap valuation for any company that's growing decently. So that was a perfect time to buy. But over time, the returns mainly actually came from multiple expansions.

[00:06:55]So right now, look at the valuation we're trading at. It's one of the highest valuations Apple's ever trade at near a 37p ratio. Like I said, the market average right now is about a 25 to 30. So we're trading at a very elevated valuation here for Apple. If we take a look at the revenue growth numbers too, it's pretty muted for this company. Ever since 2022, we've seen mid to mids singledigit growth rates. This company has not been growing very well, but this past few quarters, they've reacelerated growth. So, people are I think investors are starting to get excited about Apple, returning back to a growth period for this company going forward. And as you can see that in these numbers, it definitely looks like they are potentially entering another acceleration of growth rates. So that would be positive for this company going forward. I also want to show you guys the net income of this company. The net income is also looking pretty good. The annual numbers also look pretty solid.

[00:07:51]$122 billion in net income. It's just a great company, but there's definitely concerns over especially in the past 5 years. What is this company going to be able to return to growth a growth machine? Now I think we could definitely see that happen in the upcoming years.

[00:08:08]So that's going to factor in to our assumptions for our intrinsic value calculator here with Apple. Guys, this is my assumptions going forward for this company. We have revenue growth. I expect them to grow at high singledigit growth rates and I think that's what most analysts expect. Future PE ratio, I'm putting a 26 PE ratio. That is pretty high for a company only growing at 8%. Normally for a company growing 8%, I would look at high teens to low 20s PE ratio. But I do think that Apple deserves a very high premium for the market. Their return on invested capital is insane. They buy back a lot of shares. They return a lot of money back to their shareholders. And I think they deserve a decent valuation. And this company isn't going anywhere during bad economic times. I think they're still going to be perfectly fine. So I think they deserve a higher premium. Future profit margin, I'm put 28%. That's right around where they are today. And when I press calculate, guys, I get a 3.7% return from this company. So I think if you were to buy this company, the only way I would see this working is if the PE ratio stayed at 35, then you can make a about market average returns. I just don't see how Apple should be trading at a 37 PE ratio. That's my personal opinion with Apple. So let's go back to the rankings. And guys, I kind of have to put Apple right here into the overvalued category. I know I personally don't really think that Apple's going to be not a great returner for the future.

[00:09:37]I just think it's getting kind of ridiculous over time. There's not much room for this company to continue to expand their multiples to get a better return on your investment. Unless they start to reacelerate growth in terms of the business itself by a huge margin, I just think it's in the overvalued category right now. Maybe fair valued, but I'm going to put in overvalued. The next company we have here is Google.

[00:10:02]This was one of my biggest positions in my portfolio. I bought this company at about $150 when everybody was saying that this company's dead. And my thesis was I actually think Google is going to be a beneficiary from AI. And as it turns out, it definitely is. So, I'm glad I bought Google. Right now, the stock's at about $370. So, let's take a look at Google. So, when we take a look at Google, guys, look at the PE ratio compared to the stock price. As we can see, the stock has been rallying ever since 2025 when I really started my position. The stock is has reached $400.

[00:10:35]The past year, the stock is up 118%.

[00:10:39]But here's the thing, it's also a multiple expansion. The main reason for this multiple expansion is because look at how cheap this company was trading at in 2025. 17 PE ratio. The reason for this was because people were fearing that chat GPT and other LLMs are going to take over Google search. However, people realized that Google's actually going to be beneficiary especially with Google Gemini coming out. People are real excited about Google going forward.

[00:11:05]And as you can see, the stock price has followed that excitement as long along with the multiple expansion up to about a 29p ratio. It's a bit elevated from today. But if we take a look at the fundamentals, the growth numbers still look amazing for this company. Take a look at these quarterly numbers. They just grew their revenue 22% to $110 billion. This growth is insane from Google. Also, the net income is looking crazy. But once again guys, this is very similar to Microsoft. They have big investments in SpaceX and in Anthropic.

[00:11:41]With those investments, Google is really getting a huge spike in that net income.

[00:11:46]If we take a look at the annual numbers, they're trailing 12 months net income, $160 billion.

[00:11:53]With that in mind, in reality, if we take a look at the operating income, it did not grow nearly as much. So, with if we take that into account with their PE ratio, right now, their PE ratio is very underexaggerated.

[00:12:07]Their PE ratio should be a lot higher.

[00:12:09]So, like I was saying, the 29 PE ratio on the surface level doesn't look too bad, but the real PE ratio around Google should actually be near 40. That's a very elevated P ratio, especially for Google compared to its past. So, that's what I'm concerned about. But, let's take a look at the intrinsic value calculations to see, should we be that worried about it or does it still look like a decent time to buy? So, here with Google, here are my assumptions. And these could be conservative, but 13% revenue growth, I think that's fair for the upcoming years, especially as Google Cloud has been actually just destroying competition in terms of how much they're growing compared to say AWS and Azure.

[00:12:52]Their RPO, the remaining performance obligations, the basically the backlogs of the contractual revenue that they're going to get has been skyrocketing.

[00:13:01]Also, I think they should trade at about what it is today. If we got rid of those unrealized gains, I think a 28p ratio is fair for this company. They have a huge moat with Google search. Future profit margin 32%. Right now, it's at 38, but once again, it's overexaggerated because of those investments. So, in reality, their operating income margins is near that 30%. So, I'm going to actually elevate it a little bit higher. Look at the calculations. I get about 9.8% 8% return from today. Still, with the huge rise in stock price, I think this looks like an okay time to buy. Um, if you wanted to make a market average return, but personally, I want a 15 plus% return on my investment. So, that with this right here, I would not be buying today.

[00:13:48]Once again, my desired buy price is in the low 300s for a 15 plus% return.

[00:13:53]That's where I'd re-enter into the business. I think Google's a great company going forward. You just have to pay the right price and that's with every stock. So with that in mind for Google, I'm going to have to put this into the fair valued category because I think you can make basically market average returns at today's price. The next company we're going to and guys, I actually just realized I forgot about Amazon. That's my bad, but luckily I caught that. The next company we have here is actually my largest position in my portfolio. This is going to be Meta.

[00:14:24]And what Meta does is basically just advertising. They make 99% of their revenue comes from advertising from all their big platforms like Instagram, Facebook, threads, WhatsApp, Messenger, all that good stuff. So, this is how they make most their money. And personally, the reason why I'm so invested in this company is because one, the valuation, two, and I think they're going to be a very good beneficiary from AI going forward. I think most advertising companies will be the best beneficiaries from AI because of how efficient it makes advertising for advertisers. So then advertisers will pay more money to be on these platforms.

[00:15:01]So if we take a look at Meta guys, here's the PE ratio overlaid with the stock price. The PE ratio right now is about 22. But similar kind of similar to Microsoft and Google, there is some accounting issues when it comes to the PE ratio. If we take a look at the net income, this is actually going to be a positive for us here. If we go to the net income for Meta, guys, it's actually the opposite of Microsoft and Google.

[00:15:27]Look at the quarterly numbers. We actually had a tax basically hit with Meta which made the net income fall.

[00:15:35]With that in mind, with that tax hit, in reality, this net income should be higher. So, when the net income should be higher, the P ratio should be lower.

[00:15:43]Right now, Meta is actually trading at about an 18 to 19 PE ratio, less than 20 PE ratio. And look at the growth rates of this net income, growing at 20, 30, 40%. The revenue growth rates also look insane from Meta, growing 33% in their last quarter. This is the fastest growth we've seen from Meta since 2021. This company is growing at an insane pace.

[00:16:08]Yet, the PE ratio is the cheapest on the market compared to these Mag 7 companies. This is the cheapest PE ratio on the entire Mag 7 tier list. That's why I'm so confident in the business.

[00:16:21]Yes, there's people fearing that all this capex spend though. If we take a look at the capex, we scroll down here to the capital expenditures. They're spending a lot on capex. But I want to push back by saying this capex I think is warranted for the business. As we can see the revenue growths are reacelerating to 30 plus percent for a company like Meta at this scale is insane growth. So that's what I like about Meta. And also there has been statistical facts showing that AI is helping engagement rates on their platforms helping advertisers get better conversion rates. So that in return has increased the average price per ad for these advertisers, resulting in a huge revenue spike in Meta. So that's what I'm confident in with Meta going forward. So let's use my intrinsic value calculator and show you guys what I think I can make on my biggest investment. So here are my assumptions going ahead for Meta, guys. I'm going to assume 17% revenue growth for the next 5 years. This is what analysts expect and I think they could actually outperform that with these AI investments. That's my personal opinion. Future P ratio, I'm also going to do a 28. Very similar to Microsoft and Google. Even though I expect Meta to grow at a faster clip, I think Meta is a lot more cyclical company since 99% of their money comes from advertisers, they shouldn't be trading at such a huge premium because there's a chance if an economic downturn does happen, this company will be the worst hurt out of basically the entire Mag 7. Future profit margin 35% and I think they're going to buy back at about 1% each year. Look at these returns.

[00:17:54]25.8% return for Meta and I think these are conservative numbers honestly going forward for this company. So with that being said, I have to put Meta into the buy now category. Meta just looks like a great company to own right now. Even if it's a small portion in your portfolio, I think it looks very good to buy right now. That's my personal opinion. The next company we have up here is Nvidia, the largest company on Earth right now.

[00:18:20]And what they do is make these GPUs for all these data centers. And basically every single big tech company here besides from say Tesla and Apple buy from Nvidia. So all this capex increase from all these companies is good for Nvidia because that capex increase is actually going to Nvidia basically. So Nvidia, this is going to be a hard one to analyze. The reason I say this is because the cyclical nature of chip businesses and what I mean by this is we don't know when this AI demand is going to slow up for this company. That is the main determining factor. If you think it's going to slow down faster than analysts expect, it probably is an overvalued stock. If you think it's going to last longer than what analysts expect, this could be a very undervalued time to buy the company. It's just really when is this demand going to slow up? And we don't really have any idea when that's going to happen. But let's use my intrinsic value calculator and take a look at the fundamentals just to look at it. When we take a look at Nvidia, guys, though, look at the PE ratio. This PE ratio is insanely cheap.

[00:19:26]32p ratio. Normally, if you looked at this 32 33 PE ratio looks pretty elevated, but look at these numbers.

[00:19:33]These are the best. This is the best income statement I've ever seen in my life. Look at these growth numbers, guys. growing 125% 114% 66%.

[00:19:44]Look at the quarterly number. They just grew in the first quarter of 2027. 85% revenue numbers. But this is once again the problem we're going to have with analyzing this company. When will this growth stop? It can't just keep going on forever because there is basically it's not a renewing subscription type of company. It's a cyclical chip semiconductor company. So with the cyclicality nature of this business, it's going to slow down at some point and potentially decline in revenue. If we take a look at the net income grew 210%, they made 60 billion in one quarter, guys. They're on pace to make over 200 billion in a year. It makes sense why this is the most valuable company out there. So with the PE ratio in terms of their growth numbers, this looks actually very cheap. But let's use my intrinsic value calculator and see what I think we can make. So guys, here are my assumptions going ahead for Nvidia. I'm going to put 20% revenue growth for the next five years. But here's the thing. I'm not going to have a high P ratio for this company because I expect what to happen in the upcoming year or two. I expect 50 plus% revenue growth. But then I expect pretty fast deceleration.

[00:20:54]And with that being said, I'm going to expect a 30p ratio, which is normally very low for 20% revenue growth, but like I said, I expect deceleration in the upcoming 5 years. With the future profit margin, I'll put 45%. Right now, it's 63%. So, once again, I'm expecting a pretty big decrease in this profit margin as these companies don't want to need these Nvidia chips as much. The demand isn't as there as much. Once they start to shift to say AMD, also Amazon's trying to make their own chips and sell them. Once there's a lot more competitors in the market, the profit margin will probably get squeezed. When I press calculate the intrinsic values though for Nvidia, let's see what we get. So with Nvidia, I actually get 11% return. And this is basically what I'm thinking with this company. I would say it's fair value to undervalue category.

[00:21:42]Personally, as an investor, I just think it's very hard to really understand what this company is going to do in the future. Nobody knows. That's the hard part with Nvidia. All these other big tech companies are a lot more predictable. Maybe besides Tesla, but the other ones are a lot more predictable. They're mainly subscription-based revenue companies. So there's not going to be much variability in the upcoming future. But since Nvidia is a very cyclical company, it's hard to get a true fair value of this company.

[00:22:10]If you want to buy this company, I think the main thing you just have to look at is do you think that compared to analysts and what everybody else thinks does the will the AI demand continue to go further in time and will these big tech companies spend even more than what's expected? I think that is what's going to happen. So, if we go back to my rankings for Nvidia, guys, I'm actually going to put it into the undervalued category. I think right now Nvidia is looking pretty undervalued from today, especially compared to how fast this company's growing. It's just very hard to determine what the fair value is. So, I'm going to put in the undervalued.

[00:22:46]Next, we have the big Tesla here. This company, I've gotten a lot of flack for this company. I just think this company is a very overvalued company around it.

[00:22:55]We have not seen any real fundamental in increases in terms of the business. The company has been stalling, but people are still excited about the business going forward with their robo taxis, all their robots that they're trying to make, but it hasn't materialized yet.

[00:23:12]And people really thought that it was a lot more things were going to happen by this time with Tesla, and it just hasn't happened yet. But let's take a look at the fundamentals. I just want to show you guys the PE ratio of Tesla right here. As we can see with Tesla, the PE ratio is at 355. Like I said, the market average is about 25. This is an insanely high valuation for a company like this.

[00:23:38]The main reason I say this is because of the growth numbers. Look at these growth numbers here. It has basically stalled over the past five years growing literally we had 51% growth in 2022 so huge growth then 18% 1% negative 3% and 3%. These quarterly numbers though are getting a little bit better but nonetheless the fundamentals of this business has not been improving at all.

[00:24:04]If anything it's deteriorating over the past 3 or 5 years especially with the net income guys. Look at this net income. They're barely even making much money anymore. The main reason around this is less people are buying Teslas.

[00:24:16]They're investing more into these other areas they want to get into. My biggest problem with Tesla is basically they don't really have the fundamentals behind it. They have basically the theory behind it or what could happen with robo taxing and all that. And that's more speculation than investing.

[00:24:36]That's my biggest fear with Tesla. But let's use my intrinsic value calculator to see how much return I think we can make. Here are my assumptions going ahead for Tesla, guys. 15% revenue growth, 35p ratio, and 10% profit margin. So, this is reaceleration in revenue growth. P ratio I'm expecting to be a lot lower. With a company growing 15%, they do not deserve a high PE ratio, especially like it is now. Future profit margin 10%. Right now, it's at 4%, I'm expecting huge efficiency going ahead for Tesla. The other thing I don't like here is they're diluting shareholders every single year by 6%. So this company in terms of the dilution is doing very bad. If you're an investor in Tesla, you're owning less and less every single year. Scroll down. With these assumptions, I get - 20% returns. Do I think with Tesla you're going to get negative 20%. Probably not. But here, say we have huge acceleration in growth.

[00:25:31]Let's do a 50p ratio with Tesla. Profit margin. Say we get up to 15. Press calculate. And I think these probably won't happen. we get negative 3% returns, guys. And I'm not saying here that Tesla won't do decent in the future. I just think from today's valuation, it's looking very hard for this company to get good returns, especially from today. And with that in mind, I have to place Tesla into the overvalued category. That's just my personal opinion going ahead with Tesla.

[00:26:03]The final company we have here is Amazon, guys. Amazon I think could be one of the biggest beneficiaries as well as these advertising companies for AI.

[00:26:12]The main reason I think that is just because of this company is trying to shift towards robots that will make the company a lot more efficient and increase their profit margins. Also AWS is a big beneficiary from AI going forward. So with that in mind, let's take a look at the fundamentals. Taking a look at Amazon here. We're trading at a very cheap valuation 31p ratio. It's one of the cheapest we've ever traded at besides just a few months ago. And a few months ago, I was very close to buying this company and I probably should have bought some. But nonetheless, we learned from our mistakes. I wanted to buy under $190. We got to like $1.95.

[00:26:49]But if we take a look at the fundamentals for this company, Amazon, once again, like every big tech stock is growing very well. Look at the quarterly numbers. We just grew 16% in the past quarter, year-over-year. Every single big tech company looks like they're reacelerating growth numbers. Look at the net income as well. Very good from this company. So, this company is doing very good fundamentally. Let's go over to the intrinsic value calculator and see what I think we can make with Amazon. This is what I'm expecting. 12% revenue growth, 27p ratio, 15% profit margin, and slight dilution. That's the other thing I don't like about Amazon.

[00:27:24]They dilute shareholders every single year. Scroll down here. I get about an 11 12% return. So from today it doesn't look bad. Where I want to buy this company is in the low 200s. I have reanalyzed Amazon and I probably should have bought this company at 190. That was a big mistake by me. But nonetheless, I think right now Amazon definitely looks potentially undervalued. So if we take a look at my final rankings here for the Mag 7, this is what I have. Meta at a buy now, Microsoft, Nvidia, Amazon at undervalued, Google fair, Apple and Tesla overvalued. So, comment down below if you agree with these assumptions.

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