Microsoft Corporation (MSFT) vs TransDigm Group Incorporated (TDG): Which Is the Better Buy in 2026?
As of 2026-11-01, MSFT is undervalued at $522, with a DCF intrinsic value of $802 and a margin of safety of 35%. TDG is overvalued at $1147, with an intrinsic value of $990 and a margin of safety of -16%. Of the two, MSFT has the wider margin of safety.
Rewards
- ★Microsoft Corporation has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Gross margin of 67.7% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Microsoft Corporation scores 84/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
- ★TransDigm Group Incorporated has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★TransDigm Group Incorporated scores 94/100 on the Economic Moat Score (Wide Moat), with margin stability as the strongest competitive dimension.
- ★Free cash flow has grown at a 29.9% CAGR over the past 4 years, demonstrating strong earnings power growth.
Risks
- ⚠FCF yield of 1.7% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠5 insider sales totaling $75.4M with no purchases in the past 3 months — insiders are reducing their exposure.
- ⚠FCF yield of 2.3% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠PEG ratio of 3.05 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠Net debt/EBITDA of 6.0x indicates heavy leverage — it would take over 4 years of EBITDA to pay off net debt.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $522?
The market implies +13.0% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +22.5%, reflecting heavy growth investment expected to generate future returns.
What growth rate is the market pricing in at $1147?
The market implies +17.9% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +23.8%, reflecting heavy growth investment expected to generate future returns.
Economic Moat Score
Learn more →Wide moat driven primarily by revenue predictability. Reinvestment Efficiency is the area most vulnerable to competitive pressure.
Wide moat with strength across all dimensions. Margin Stability is the standout factor.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: MSFT vs TDG
Is Microsoft Corporation or TransDigm Group Incorporated more undervalued in 2026?▼
Based on our discounted cash flow model, MSFT trades at a 34.9% margin of safety (intrinsic value $802 vs. price $522), compared to TDG's -15.8% margin of safety (intrinsic $990 vs. $1147).
Which stock has a wider economic moat, Microsoft Corporation or TransDigm Group Incorporated?▼
TDG scores 94/100 (Wide moat), while MSFT scores 84/100 (Wide moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is TransDigm Group Incorporated in financial distress?▼
TDG's Altman Z-Score of 2.0 places it in the Grey zone, signaling elevated bankruptcy risk. MSFT scores 9.1 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, Microsoft Corporation or TransDigm Group Incorporated?▼
TransDigm Group Incorporated (TDG) generates a 2.3% free cash flow yield, compared to Microsoft Corporation's 1.7%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Microsoft Corporation or TransDigm Group Incorporated?▼
MSFT earns 22.5% ROIC versus TDG's 10.9%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Microsoft Corporation's or TransDigm Group Incorporated's?▼
MSFT's dividend earns a safety score of 94/100 (Very Safe), compared to TDG's 21/100 (Unsafe). MSFT has raised its dividend for 3 consecutive years.