MICROSOFT CORP (NASDAQ:MSFT) – A Strong Candidate for Quality Investors

MICROSOFT CORP (NASDAQ:MSFT) stands out as a high-quality stock based on our Caviar Cruise screening methodology. The company demonstrates strong revenue and profit growth, high returns on invested capital, and solid financial health, making it a compelling choice for investors focused on long-term quality holdings.

Key Strengths of Microsoft for Quality Investors

• Revenue and EBIT Growth: Microsoft has delivered a 5-year revenue growth rate of 13.26%, while EBIT growth has been even stronger at 20.56%, indicating improving profitability and operational efficiency.
• High Return on Invested Capital (ROIC): With an ROIC (excluding cash and goodwill) of 44.08%, Microsoft generates substantial returns on its investments, a hallmark of a well-managed business.
• Strong Profit Quality: The company converts 89.91% of its net income into free cash flow, reflecting reliable earnings and efficient capital allocation.
• Low Debt Burden: Microsoft’s debt-to-free cash flow ratio of 1.18 suggests it could repay its debt in just over a year using current cash flows, highlighting financial stability.

Fundamental Analysis Summary

Microsoft scores 7 out of 10 in our fundamental rating, with particularly high marks for profitability and financial health. Key takeaways include:

• Profitability: Exceptional margins (Operating Margin of 45.23%) and strong returns on capital.
• Dividend Reliability: A growing dividend with a sustainable payout ratio of 24.30%.
• Valuation: While the stock trades at a premium (P/E of 37.88), its growth prospects and industry position may justify the valuation.

Our Caviar Cruise screener lists more quality stocks meeting these criteria. For a deeper look, review the full fundamental report on MSFT.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.