Ranking the “Magnificent Seven” From Most to Least Attractive, Based on Future Cash Flow
Earlier this month, all of Wall Street’s major indexes reached fresh record highs. While artificial intelligence (AI) has been the stock market’s prime catalyst, it’s the “Magnificent Seven” that have done most of the heavy lifting. The Magnificent Seven is comprised of:
- Nvidia (NVDA 3.99%)
- Alphabet (GOOGL 0.85%)(GOOG 0.61%)
- Apple (AAPL 0.73%)
- Microsoft (MSFT +1.96%)
- Amazon (AMZN +0.69%)
- Tesla (TSLA 5.69%)
- Meta Platforms (META 0.13%)
Although each of these companies possesses well-defined competitive advantages, their outlooks can vary. Arguably, no metric does a better job of evaluating these foundational companies than cash flow.
Image source: Getty Images.
Ranking the Magnificent Seven by their future cash flow
While the traditional price-to-earnings ratio is useful for quickly evaluating mature businesses, this time-tested valuation tool can get tripped up by growth stocks. With the Magnificent Seven aggressively reinvesting their cash flow into high-growth initiatives, the price-to-cash-flow ratio offers a more comprehensive look at whether these stocks are potential bargains or pitfalls.
Based on Wall Street’s consensus cash-flow-per-share estimates for the following year, here’s how the Magnificent Seven rank, from cheapest (i.e., most attractive) to priciest:
- Meta Platforms: 9 times estimated forward-year cash flow
- Amazon: 10.86
- Microsoft:12.98
- Nvidia: 16.54
- Alphabet: 17.97
- Apple: 27.42
- Tesla: 80.74
On one end of the spectrum, Tesla and Apple appear egregiously expensive, relative to the cash flow they’re generating. Even Google parent Alphabet, which, in hindsight, was historically inexpensive at this time last year, is no longer a screaming bargain.
On the other hand, AI titans Nvidia and Microsoft are becoming more palatable to fundamentally focused investors. However, neither company can hold a candle to the value offered by Meta Platforms and Amazon.
Image source: Getty Images.
Meta Platforms and Amazon are the two clearest bargains within the Magnificent Seven
Despite Wall Street’s major indexes rocketing to new highs three weeks ago, shares of Meta have gone nowhere since the start of 2025. Meta CEO Mark Zuckerberg has repeatedly raised his company’s capital expenditures forecast for AI, leading to worries about future margin constraints.
However, these concerns overlook Meta’s dominant social media assets, including Facebook, WhatsApp, Instagram, Threads, and Facebook Messenger. In March, the company’s family of apps attracted an average of 3.56 billion daily users. No other social platform comes close to matching this figure, which affords Meta exceptional ad pricing power.
Today’s Change
(-0.13%) $-0.75
Current Price
$563.10
Key Data Points
Market Cap
$1.4T
Day’s Range
$561.03 – $572.19
52wk Range
$520.26 – $796.25
Volume
635.4K
Avg Vol
17.5M
Gross Margin
81.94%
Dividend Yield
0.37%
Furthermore, Meta is successfully integrating generative AI solutions into its advertising platform. Businesses having the ability to tailor messages to users can improve click-through rates and boost Meta’s ad pricing premium.
Amazon has also taken the AI bull by the horns. Since integrating generative AI and large language model solutions into Amazon Web Services, the world’s No. 1 cloud infrastructure services platform, sales in this high-margin segment have reaccelerated. AWS has the potential to more than double Amazon’s operating cash flow between 2025 and 2028.
Today’s Change
(0.69%) $1.60
Current Price
$234.39
Key Data Points
Market Cap
$2.5T
Day’s Range
$232.00 – $236.88
52wk Range
$196.00 – $278.56
Volume
1.9M
Avg Vol
45.3M
Gross Margin
50.60%
Amazon’s other ancillary operating segments aren’t slouches, either. Exclusive streaming content (e.g., Thursday Night Football) is boosting the pricing power and lure of a Prime subscription. Meanwhile, Amazon’s billions of monthly visits are facilitating steady double-digit sales growth for the company’s advertising services segment.
Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
