MICROSOFT CORP (MSFT) Stock Fundamental Analysis
USA - NASDAQ:MSFT - US5949181045 - Common Stock
517.35 USD
+1.61 (+0.31%)
516.95 USD
-0.4 (-0.08%)
We assign a fundamental rating of 7 out of 10 to MSFT. MSFT was compared to 281 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 valied quite expensively at the moment, while it does show a decent growth rate. Finally MSFT also has an excellent dividend rating. These ratings would make MSFT suitable for dividend and quality investing!
1. Profitability
1.1 Basic Checks
MSFT had positive earnings in the past year.
In the past year MSFT had a positive cash flow from operations.
Each year in the past 5 years MSFT has been profitable.
Each year in the past 5 years MSFT had a positive operating cash flow.
1.2 Ratios
With an excellent Return On Assets value of 16.45%, MSFT belongs to the best of the industry, outperforming 92.17% of the companies in the same industry.
MSFT has a better Return On Equity (29.65%) than 92.17% of its industry peers.
Looking at the Return On Invested Capital, with a value of 22.08%, MSFT belongs to the top of the industry, outperforming 93.95% 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 11.95%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 16.45% | ||
| ROE | 29.65% | ||
| ROIC | 22.08% |
ROA(3y)17.07%
ROA(5y)17.9%
ROE(3y)32.52%
ROE(5y)36.88%
ROIC(3y)22.94%
ROIC(5y)23.52%
1.3 Margins
MSFT has a better Profit Margin (36.15%) than 92.88% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
MSFT has a Operating Margin of 45.62%. This is amongst the best in the industry. MSFT outperforms 96.80% of its industry peers.
MSFT's Operating Margin has improved in the last couple of years.
With a Gross Margin value of 68.82%, MSFT perfoms like the industry average, outperforming 50.18% of the companies in the same 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 | 45.62% | ||
| PM (TTM) | 36.15% | ||
| GM | 68.82% |
OM growth 3Y2.75%
OM growth 5Y4.26%
PM growth 3Y-0.49%
PM growth 5Y3.14%
GM growth 3Y0.21%
GM growth 5Y0.31%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MSFT is creating value.
The number of shares outstanding for MSFT remains at a similar level compared to 1 year ago.
Compared to 5 years ago, MSFT has less shares outstanding
The debt/assets ratio for MSFT has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 10.12 indicates that MSFT is not in any danger for bankruptcy at the moment.
MSFT's Altman-Z score of 10.12 is amongst the best of the industry. MSFT outperforms 85.77% 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.
Looking at the Debt to FCF ratio, with a value of 1.25, MSFT is in the better half of the industry, outperforming 73.31% 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 comparable to the rest of the industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.25 | ||
| Altman-Z | 10.12 |
ROIC/WACC1.96
WACC11.26%
2.3 Liquidity
A Current Ratio of 1.35 indicates that MSFT should not have too much problems paying its short term obligations.
MSFT has a Current ratio (1.35) which is comparable to the rest of the industry.
A Quick Ratio of 1.35 indicates that MSFT should not have too much problems paying its short term obligations.
The Quick ratio of MSFT (1.35) is comparable to the rest of the 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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.35 | ||
| Quick Ratio | 1.35 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 15.50% over the past year.
Measured over the past years, MSFT shows a quite strong growth in Earnings Per Share. The EPS has been growing by 18.86% on average per year.
The Revenue has grown by 14.93% in the past year. This is quite good.
MSFT shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 14.52% yearly.
EPS 1Y (TTM)15.5%
EPS 3Y14.03%
EPS 5Y18.86%
EPS Q2Q%23.73%
Revenue 1Y (TTM)14.93%
Revenue growth 3Y12.42%
Revenue growth 5Y14.52%
Sales Q2Q%18.1%
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 15.23% yearly.
MSFT is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 11.89% yearly.
EPS Next Y15.9%
EPS Next 2Y16.5%
EPS Next 3Y17.15%
EPS Next 5Y15.23%
Revenue Next Year15.52%
Revenue Next 2Y14.96%
Revenue Next 3Y14.93%
Revenue Next 5Y11.89%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 37.93, MSFT can be considered very expensive at the moment.
MSFT's Price/Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 61.21% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 27.86, MSFT is valued a bit more expensive.
Based on the Price/Forward Earnings ratio of 32.73, the valuation of MSFT can be described as expensive.
Based on the Price/Forward Earnings ratio, MSFT is valued a bit cheaper than 60.50% of the companies in the same industry.
MSFT is valuated rather expensively when we compare the Price/Forward Earnings ratio to 23.32, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 37.93 | ||
| Fwd PE | 32.73 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 77.94% of the companies listed in the same industry.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of MSFT is on the same level as its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 53.7 | ||
| EV/EBITDA | 23.14 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The excellent profitability rating of MSFT may justify a higher PE ratio.
A more expensive valuation may be justified as MSFT's earnings are expected to grow with 17.15% in the coming years.
PEG (NY)2.39
PEG (5Y)2.01
EPS Next 2Y16.5%
EPS Next 3Y17.15%
5. Dividend
5.1 Amount
With a yearly dividend of 0.71%, 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 27.58. MSFT pays more dividend than 91.81% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.41, MSFT's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
5.2 History
On average, the dividend of MSFT grows each year by 10.24%, which is quite nice.
MSFT has paid a dividend for at least 10 years, which is 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)10.24%
Div Incr Years20
Div Non Decr Years20
5.3 Sustainability
MSFT pays out 23.65% of its income as dividend. This is a sustainable payout ratio.
MSFT's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP23.65%
EPS Next 2Y16.5%
EPS Next 3Y17.15%
517.35
+1.61 (+0.31%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.31%
Inst Owner Change-1.6%
Ins Owners0.03%
Ins Owner Change0.02%
Market Cap3845.55B
Analysts85.71
Price Target618.12 (19.48%)
Short Float %0.88%
Short Ratio3.11
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
Yearly Dividend3.24
Dividend Growth(5Y)10.24%
DP23.65%
Div Incr Years20
Div Non Decr Years20
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)5.77%
Min EPS beat(2)5.34%
Max EPS beat(2)6.2%
EPS beat(4)4
Avg EPS beat(4)4.44%
Min EPS beat(4)1.79%
Max EPS beat(4)6.2%
EPS beat(8)7
Avg EPS beat(8)4.04%
EPS beat(12)10
Avg EPS beat(12)3.55%
EPS beat(16)12
Avg EPS beat(16)3.12%
Revenue beat(2)2
Avg Revenue beat(2)0.97%
Min Revenue beat(2)0.4%
Max Revenue beat(2)1.54%
Revenue beat(4)2
Avg Revenue beat(4)0.21%
Min Revenue beat(4)-0.75%
Max Revenue beat(4)1.54%
Revenue beat(8)3
Avg Revenue beat(8)0.03%
Revenue beat(12)4
Avg Revenue beat(12)-0.18%
Revenue beat(16)5
Avg Revenue beat(16)-0.36%
PT rev (1m)0.06%
PT rev (3m)17.79%
EPS NQ rev (1m)0%
EPS NQ rev (3m)2.9%
EPS NY rev (1m)-0.04%
EPS NY rev (3m)2.73%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)1.9%
Revenue NY rev (1m)0.02%
Revenue NY rev (3m)1.81%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 37.93 | ||
| Fwd PE | 32.73 | ||
| P/S | 13.65 | ||
| P/FCF | 53.7 | ||
| P/OCF | 28.24 | ||
| P/B | 11.2 | ||
| P/tB | 19.1 | ||
| EV/EBITDA | 23.14 |
EPS(TTM)13.64
EY2.64%
EPS(NY)15.81
Fwd EY3.06%
FCF(TTM)9.63
FCFY1.86%
OCF(TTM)18.32
OCFY3.54%
SpS37.9
BVpS46.21
TBVpS27.09
PEG (NY)2.39
PEG (5Y)2.01
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 16.45% | ||
| ROE | 29.65% | ||
| ROCE | 26.9% | ||
| ROIC | 22.08% | ||
| ROICexc | 27.53% | ||
| ROICexgc | 43.75% | ||
| OM | 45.62% | ||
| PM (TTM) | 36.15% | ||
| GM | 68.82% | ||
| FCFM | 25.42% |
ROA(3y)17.07%
ROA(5y)17.9%
ROE(3y)32.52%
ROE(5y)36.88%
ROIC(3y)22.94%
ROIC(5y)23.52%
ROICexc(3y)31.07%
ROICexc(5y)36.94%
ROICexgc(3y)52.63%
ROICexgc(5y)67.5%
ROCE(3y)28.11%
ROCE(5y)28.75%
ROICexcg growth 3Y-18.02%
ROICexcg growth 5Y-15.78%
ROICexc growth 3Y-12.77%
ROICexc growth 5Y-10.15%
OM growth 3Y2.75%
OM growth 5Y4.26%
PM growth 3Y-0.49%
PM growth 5Y3.14%
GM growth 3Y0.21%
GM growth 5Y0.31%
F-Score5
Asset Turnover0.46
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.25 | ||
| Debt/EBITDA | 0.51 | ||
| Cap/Depr | 189.01% | ||
| Cap/Sales | 22.91% | ||
| Interest Coverage | 80.33 | ||
| Cash Conversion | 83.7% | ||
| Profit Quality | 70.32% | ||
| Current Ratio | 1.35 | ||
| Quick Ratio | 1.35 | ||
| Altman-Z | 10.12 |
F-Score5
WACC11.26%
ROIC/WACC1.96
Cap/Depr(3y)197.12%
Cap/Depr(5y)186.6%
Cap/Sales(3y)18.11%
Cap/Sales(5y)15.73%
Profit Quality(3y)78.85%
Profit Quality(5y)83.54%
High Growth Momentum
Growth
EPS 1Y (TTM)15.5%
EPS 3Y14.03%
EPS 5Y18.86%
EPS Q2Q%23.73%
EPS Next Y15.9%
EPS Next 2Y16.5%
EPS Next 3Y17.15%
EPS Next 5Y15.23%
Revenue 1Y (TTM)14.93%
Revenue growth 3Y12.42%
Revenue growth 5Y14.52%
Sales Q2Q%18.1%
Revenue Next Year15.52%
Revenue Next 2Y14.96%
Revenue Next 3Y14.93%
Revenue Next 5Y11.89%
EBIT growth 1Y17.45%
EBIT growth 3Y15.52%
EBIT growth 5Y19.4%
EBIT Next Year51.87%
EBIT Next 3Y27.19%
EBIT Next 5Y25.57%
FCF growth 1Y-3.32%
FCF growth 3Y3.2%
FCF growth 5Y9.62%
OCF growth 1Y14.86%
OCF growth 3Y15.21%
OCF growth 5Y17.55%