MSFT gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 284 industry peers in the Software industry. MSFT gets an excellent profitability rating and is at the same time showing great financial health properties. MSFT has a decent growth rate and is not valued too expensively. Finally MSFT also has an excellent dividend rating. With these ratings, MSFT could be worth investigating further for dividend 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 17.18%. This is amongst the best in the industry. MSFT outperforms 92.61% of its industry peers.
With an excellent Return On Equity value of 30.02%, MSFT belongs to the best of the industry, outperforming 90.14% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 22.17%, MSFT belongs to the top of the industry, outperforming 95.42% of the companies in the same industry.
The Average Return On Invested Capital over the past 3 years for MSFT is significantly above the industry average of 12.17%.
Industry Rank
Sector Rank
ROA
17.18%
ROE
30.02%
ROIC
22.17%
ROA(3y)18.24%
ROA(5y)17.55%
ROE(3y)37.2%
ROE(5y)38.43%
ROIC(3y)23.84%
ROIC(5y)22.71%
1.3 Margins
With an excellent Profit Margin value of 35.79%, MSFT belongs to the best of the industry, outperforming 95.42% of the companies in the same industry.
In the last couple of years the Profit Margin of MSFT has grown nicely.
MSFT's Operating Margin of 45.23% is amongst the best of the industry. MSFT outperforms 99.30% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.
MSFT has a Gross Margin (69.07%) which is in line with its industry peers.
In the last couple of years the Gross Margin of MSFT has remained more or less at the same level.
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MSFT is creating value.
MSFT has about the same amout of shares outstanding than it did 1 year ago.
The number of shares outstanding for MSFT has been reduced compared to 5 years ago.
The debt/assets ratio for MSFT has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 9.96 indicates that MSFT is not in any danger for bankruptcy at the moment.
MSFT's Altman-Z score of 9.96 is amongst the best of the industry. MSFT outperforms 87.68% of its industry peers.
MSFT has a debt to FCF ratio of 1.18. This is a very positive value and a sign of high solvency as it would only need 1.18 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 1.18, MSFT is doing good in the industry, outperforming 72.18% of the companies in the same industry.
MSFT has a Debt/Equity ratio of 0.24. This is a healthy value indicating a solid balance between debt and equity.
MSFT has a Debt to Equity ratio (0.24) which is in line with its industry peers.
Industry Rank
Sector Rank
Debt/Equity
0.24
Debt/FCF
1.18
Altman-Z
9.96
ROIC/WACC2.07
WACC10.71%
2.3 Liquidity
A Current Ratio of 1.37 indicates that MSFT should not have too much problems paying its short term obligations.
MSFT has a Current ratio (1.37) which is in line with its industry peers.
A Quick Ratio of 1.36 indicates that MSFT should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.36, MSFT is in line with its industry, outperforming 42.61% of the companies in the same industry.
MSFT does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
With a yearly dividend of 0.76%, MSFT is not a good candidate for dividend investing.
MSFT's Dividend Yield is rather good when compared to the industry average which is at 14.36. MSFT pays more dividend than 92.25% of the companies in the same industry.
With a Dividend Yield of 0.76, MSFT pays less dividend than the S&P500 average, which is at 2.41.
Industry Rank
Sector Rank
Dividend Yield
0.76%
5.2 History
The dividend of MSFT is nicely growing with an annual growth rate of 10.19%!
MSFT has been paying a dividend for at least 10 years, so it has a reliable track record.
MSFT has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)10.19%
Div Incr Years20
Div Non Decr Years20
5.3 Sustainability
24.30% of the earnings are spent on dividend by MSFT. This is a low number and sustainable payout ratio.
MSFT's earnings are growing more than its dividend. This makes the dividend growth sustainable.