MICROSOFT CORP (MSFT)
US5949181045 - Common Stock
We assign a fundamental rating of 7 out of 10 to MSFT. MSFT was compared to 277 industry peers in the Software industry. MSFT has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. MSFT is not priced too expensively while it is growing strongly. Keep and eye on this one! Finally MSFT also has an excellent dividend rating. These ratings could make MSFT a good candidate for dividend and growth and quality investing.
1. Profitability
1.1 Basic Checks
In the past year MSFT was profitable.
MSFT had a positive operating cash flow in the past year.
MSFT had positive earnings in each of the past 5 years.
In the past 5 years MSFT always reported a positive cash flow from operatings.
1.2 Ratios
MSFT has a Return On Assets of 17.80%. This is amongst the best in the industry. MSFT outperforms 95.64% of its industry peers.
With an excellent Return On Equity value of 34.04%, MSFT belongs to the best of the industry, outperforming 94.91% of the companies in the same industry.
MSFT has a Return On Invested Capital of 22.99%. This is amongst the best in the industry. MSFT outperforms 97.82% of its industry peers.
MSFT had an Average Return On Invested Capital over the past 3 years of 24.79%. This is significantly above the industry average of 10.02%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.8% | ||
| ROE | 34.04% | ||
| ROIC | 22.99% |
ROA(3y)18.62%
ROA(5y)16.85%
ROE(3y)40.64%
ROE(5y)39.54%
ROIC(3y)24.79%
ROIC(5y)22.08%
1.3 Margins
MSFT has a better Profit Margin (36.43%) than 96.73% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
MSFT's Operating Margin of 44.70% is amongst the best of the industry. MSFT outperforms 100.00% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.
The Gross Margin of MSFT (69.89%) is comparable to the rest of the industry.
In the last couple of years the Gross Margin of MSFT has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 44.7% | ||
| PM (TTM) | 36.43% | ||
| GM | 69.89% |
OM growth 3Y4.56%
OM growth 5Y5.91%
PM growth 3Y3.32%
PM growth 5Y17.86%
GM growth 3Y0.56%
GM growth 5Y1.1%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MSFT is creating value.
MSFT has less shares outstanding than it did 1 year ago.
MSFT has less shares outstanding than it did 5 years ago.
The debt/assets ratio for MSFT has been reduced compared to a year ago.
2.2 Solvency
MSFT has an Altman-Z score of 9.74. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
MSFT has a Altman-Z score of 9.74. This is amongst the best in the industry. MSFT outperforms 86.55% of its industry peers.
MSFT has a debt to FCF ratio of 1.25. This is a very positive value and a sign of high solvency as it would only need 1.25 years to pay back of all of its debts.
MSFT's Debt to FCF ratio of 1.25 is fine compared to the rest of the industry. MSFT outperforms 72.73% of its industry peers.
MSFT has a Debt/Equity ratio of 0.33. This is a healthy value indicating a solid balance between debt and equity.
MSFT has a worse Debt to Equity ratio (0.33) than 61.45% of its industry peers.
Although MSFT does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.33 | ||
| Debt/FCF | 1.25 | ||
| Altman-Z | 9.74 |
ROIC/WACC2.21
WACC10.4%
2.3 Liquidity
MSFT has a Current Ratio of 1.24. This is a normal value and indicates that MSFT is financially healthy and should not expect problems in meeting its short term obligations.
MSFT's Current ratio of 1.24 is on the low side compared to the rest of the industry. MSFT is outperformed by 65.09% of its industry peers.
A Quick Ratio of 1.23 indicates that MSFT should not have too much problems paying its short term obligations.
MSFT's Quick ratio of 1.23 is on the low side compared to the rest of the industry. MSFT is outperformed by 64.00% of its industry peers.
The current and quick ratio evaluation for MSFT is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.24 | ||
| Quick Ratio | 1.23 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 23.53% over the past year.
Measured over the past years, MSFT shows a very strong growth in Earnings Per Share. The EPS has been growing by 20.38% on average per year.
The Revenue has grown by 13.97% in the past year. This is quite good.
The Revenue has been growing by 13.94% on average over the past years. This is quite good.
EPS 1Y (TTM)23.53%
EPS 3Y19.49%
EPS 5Y20.38%
EPS Q2Q%20%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Sales Q2Q%17.03%
3.2 Future
MSFT is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 16.40% yearly.
Based on estimates for the next years, MSFT will show a quite strong growth in Revenue. The Revenue will grow by 14.25% on average per year.
EPS Next Y22.63%
EPS Next 2Y17.44%
EPS Next 3Y16.76%
EPS Next 5Y16.4%
Revenue Next Year15.89%
Revenue Next 2Y15.11%
Revenue Next 3Y14.93%
Revenue Next 5Y14.25%
3.3 Evolution
The EPS growth rate is stable: in the next years the growth will be about the same than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 35.94, the valuation of MSFT can be described as expensive.
Based on the Price/Earnings ratio, MSFT is valued a bit cheaper than 68.36% of the companies in the same industry.
MSFT's Price/Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 28.05.
The Price/Forward Earnings ratio is 30.68, which means the current valuation is very expensive for MSFT.
MSFT's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 61.09% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 20.07. MSFT is valued rather expensively when compared to this.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 35.94 | ||
| Fwd PE | 30.68 |
4.2 Price Multiples
80.36% of the companies in the same industry are more expensive than MSFT, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, MSFT is valued a bit cheaper than 61.45% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 43.72 | ||
| EV/EBITDA | 23.97 |
4.3 Compensation for Growth
MSFT's PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
The excellent profitability rating of MSFT may justify a higher PE ratio.
MSFT's earnings are expected to grow with 16.76% in the coming years. This may justify a more expensive valuation.
PEG (NY)1.59
PEG (5Y)1.76
EPS Next 2Y17.44%
EPS Next 3Y16.76%
5. Dividend
5.1 Amount
With a yearly dividend of 0.70%, MSFT is not a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 11.61, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.36% of the companies listed in the same industry.
With a Dividend Yield of 0.70, MSFT pays less dividend than the S&P500 average, which is at 2.37.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.7% |
5.2 History
The dividend of MSFT is nicely growing with an annual growth rate of 10.00%!
MSFT has been paying a dividend for at least 10 years, so it has a reliable track record.
MSFT has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)10%
Div Incr Years18
Div Non Decr Years18
5.3 Sustainability
24.66% of the earnings are spent on dividend by MSFT. This is a low number and sustainable payout ratio.
The dividend of MSFT is growing, but earnings are growing more, so the dividend growth is sustainable.
DP24.66%
EPS Next 2Y17.44%
EPS Next 3Y16.76%
MICROSOFT CORP
NASDAQ:MSFT (5/31/2024, 7:00:00 PM)
After market: 415.19 +0.06 (+0.01%)415.13
+0.46 (+0.11%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners72.16%
Inst Owner Change-0.12%
Ins Owners5.99%
Ins Owner Change-0.04%
Market Cap3085.37B
Analysts86.67
Price Target491.37 (18.37%)
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.7% |
Dividend Growth(5Y)10%
DP24.66%
Div Incr Years18
Div Non Decr Years18
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2.77%
Min EPS beat(2)2.27%
Max EPS beat(2)3.27%
EPS beat(4)4
Avg EPS beat(4)4.86%
Min EPS beat(4)2.27%
Max EPS beat(4)10.49%
EPS beat(8)6
Avg EPS beat(8)2.7%
EPS beat(12)9
Avg EPS beat(12)3.72%
EPS beat(16)13
Avg EPS beat(16)5.98%
Revenue beat(2)0
Avg Revenue beat(2)-0.39%
Min Revenue beat(2)-0.51%
Max Revenue beat(2)-0.26%
Revenue beat(4)1
Avg Revenue beat(4)0.04%
Min Revenue beat(4)-0.69%
Max Revenue beat(4)1.63%
Revenue beat(8)2
Avg Revenue beat(8)-0.57%
Revenue beat(12)4
Avg Revenue beat(12)-0.24%
Revenue beat(16)7
Avg Revenue beat(16)0.37%
PT rev (1m)4.21%
PT rev (3m)5.59%
EPS NQ rev (1m)1.74%
EPS NQ rev (3m)1.89%
EPS NY rev (1m)1.28%
EPS NY rev (3m)4.65%
Revenue NQ rev (1m)-0.25%
Revenue NQ rev (3m)-0.37%
Revenue NY rev (1m)0.29%
Revenue NY rev (3m)0.59%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 35.94 | ||
| Fwd PE | 30.68 | ||
| P/S | 13.04 | ||
| P/FCF | 43.72 | ||
| P/OCF | 28.02 | ||
| P/B | 12.19 | ||
| P/tB | 29.34 | ||
| EV/EBITDA | 23.97 |
EPS(TTM)11.55
EY2.78%
EPS(NY)13.53
Fwd EY3.26%
FCF(TTM)9.5
FCFY2.29%
OCF(TTM)14.82
OCFY3.57%
SpS31.83
BVpS34.06
TBVpS14.15
PEG (NY)1.59
PEG (5Y)1.76
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.8% | ||
| ROE | 34.04% | ||
| ROCE | 28.92% | ||
| ROIC | 22.99% | ||
| ROICexc | 28.99% | ||
| ROICexgc | 56.1% | ||
| OM | 44.7% | ||
| PM (TTM) | 36.43% | ||
| GM | 69.89% | ||
| FCFM | 29.83% |
ROA(3y)18.62%
ROA(5y)16.85%
ROE(3y)40.64%
ROE(5y)39.54%
ROIC(3y)24.79%
ROIC(5y)22.08%
ROICexc(3y)43.96%
ROICexc(5y)44.65%
ROICexgc(3y)82.27%
ROICexgc(5y)92%
ROCE(3y)29.52%
ROCE(5y)26.3%
ROICexcg growth 3Y-15.78%
ROICexcg growth 5Y-13.2%
ROICexc growth 3Y-7.29%
ROICexc growth 5Y-2.79%
OM growth 3Y4.56%
OM growth 5Y5.91%
PM growth 3Y3.32%
PM growth 5Y17.86%
GM growth 3Y0.56%
GM growth 5Y1.1%
F-Score6
Asset Turnover0.49
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.33 | ||
| Debt/FCF | 1.25 | ||
| Debt/EBITDA | 0.67 | ||
| Cap/Depr | 199.92% | ||
| Cap/Sales | 16.72% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 87.72% | ||
| Profit Quality | 81.89% | ||
| Current Ratio | 1.24 | ||
| Quick Ratio | 1.23 | ||
| Altman-Z | 9.74 |
F-Score6
WACC10.4%
ROIC/WACC2.21
Cap/Depr(3y)181.48%
Cap/Depr(5y)156.86%
Cap/Sales(3y)12.53%
Cap/Sales(5y)11.89%
Profit Quality(3y)87.78%
Profit Quality(5y)92.6%
High Growth Momentum
Growth
EPS 1Y (TTM)23.53%
EPS 3Y19.49%
EPS 5Y20.38%
EPS Q2Q%20%
EPS Next Y22.63%
EPS Next 2Y17.44%
EPS Next 3Y16.76%
EPS Next 5Y16.4%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Sales Q2Q%17.03%
Revenue Next Year15.89%
Revenue Next 2Y15.11%
Revenue Next 3Y14.93%
Revenue Next 5Y14.25%
EBIT growth 1Y23.02%
EBIT growth 3Y19.2%
EBIT growth 5Y20.67%
EBIT Next Year48.95%
EBIT Next 3Y25.44%
EBIT Next 5Y20.66%
FCF growth 1Y10.88%
FCF growth 3Y9.55%
FCF growth 5Y13.02%
OCF growth 1Y26.41%
OCF growth 3Y13.01%
OCF growth 5Y14.82%