MICROSOFT CORP (MSFT) Stock Fundamental Analysis
NASDAQ:MSFT - Nasdaq - US5949181045 - Common Stock - Currency: USD
Taking everything into account, MSFT scores 7 out of 10 in our fundamental rating. MSFT was compared to 281 industry peers in the Software industry. Both the health and profitability get an excellent rating, making MSFT a very profitable company, without any liquidiy or solvency issues. MSFT is quite expensive at the moment. It does show a decent growth rate. Finally MSFT also has an excellent dividend rating. This makes MSFT very considerable 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.
In the past 5 years MSFT has always been profitable.
Each year in the past 5 years MSFT had a positive operating cash flow.
1.2 Ratios
MSFT has a better Return On Assets (16.45%) than 92.17% of its industry peers.
The Return On Equity of MSFT (29.65%) is better than 91.10% 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 95.02% of the companies in the same industry.
MSFT had an Average Return On Invested Capital over the past 3 years of 22.94%. This is significantly above the industry average of 12.11%.
| 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
With an excellent Profit Margin value of 36.15%, MSFT belongs to the best of the industry, outperforming 96.09% of the companies in the same industry.
In the last couple of years the Profit Margin of MSFT has grown nicely.
With an excellent Operating Margin value of 45.62%, MSFT belongs to the best of the industry, outperforming 98.93% of the companies in the same industry.
MSFT's Operating Margin has improved in the last couple of years.
MSFT has a Gross Margin of 68.82%. This is comparable to the rest of the industry: MSFT outperforms 50.18% of its industry peers.
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
MSFT has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
The number of shares outstanding for MSFT remains at a similar level compared to 1 year ago.
MSFT has less shares outstanding than it did 5 years ago.
Compared to 1 year ago, MSFT has an improved debt to assets ratio.
2.2 Solvency
MSFT has an Altman-Z score of 10.41. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
The Altman-Z score of MSFT (10.41) is better than 86.48% of its industry peers.
The Debt to FCF ratio of MSFT is 1.25, which is an excellent value as it means it would take MSFT, only 1.25 years of fcf income to pay off 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 of 0.24. This is comparable to the rest of the industry: MSFT outperforms 44.48% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.25 | ||
| Altman-Z | 10.41 |
ROIC/WACC2.12
WACC10.4%
2.3 Liquidity
A Current Ratio of 1.35 indicates that MSFT should not have too much problems paying its short term obligations.
With a Current ratio value of 1.35, MSFT perfoms like the industry average, outperforming 43.42% of the companies in the same 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.
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 | 1.35 | ||
| Quick Ratio | 1.35 |
3. Growth
3.1 Past
MSFT shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 15.50%, which is quite good.
The Earnings Per Share has been growing by 18.86% on average over the past years. This is quite good.
The Revenue has grown by 14.93% in the past year. This is quite good.
The Revenue has been growing by 14.52% on average over the past years. This is quite good.
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 14.31% yearly.
Based on estimates for the next years, MSFT will show a quite strong growth in Revenue. The Revenue will grow by 12.22% on average per year.
EPS Next Y12.85%
EPS Next 2Y14.86%
EPS Next 3Y15.79%
EPS Next 5Y14.31%
Revenue Next Year13.51%
Revenue Next 2Y13.97%
Revenue Next 3Y13.73%
Revenue Next 5Y12.22%
3.3 Evolution
The estimated forward EPS growth is still strong, although it is decreasing when compared to the stronger growth in the past years.
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
The Price/Earnings ratio is 38.42, which means the current valuation is very expensive for MSFT.
Based on the Price/Earnings ratio, MSFT is valued a bit cheaper than the industry average as 65.48% of the companies are valued more expensively.
MSFT's Price/Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 26.82.
Based on the Price/Forward Earnings ratio of 34.05, the valuation of MSFT can be described as expensive.
MSFT's Price/Forward Earnings ratio is in line with the industry average.
The average S&P500 Price/Forward Earnings ratio is at 36.21. MSFT is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 38.42 | ||
| Fwd PE | 34.05 |
4.2 Price Multiples
MSFT's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 78.65% of the companies in the same industry.
MSFT's Price/Free Cash Flow ratio is in line with the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 54.4 | ||
| EV/EBITDA | 23.95 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates MSFT does not grow enough to justify the current Price/Earnings ratio.
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 15.79% in the coming years.
PEG (NY)2.99
PEG (5Y)2.04
EPS Next 2Y14.86%
EPS Next 3Y15.79%
5. Dividend
5.1 Amount
MSFT has a yearly dividend return of 0.60%, which is pretty low.
MSFT's Dividend Yield is rather good when compared to the industry average which is at 31.80. MSFT pays more dividend than 91.46% of the companies in the same industry.
With a Dividend Yield of 0.60, MSFT pays less dividend than the S&P500 average, which is at 2.35.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.6% |
5.2 History
On average, the dividend of MSFT grows each year by 10.19%, 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)10.19%
Div Incr Years20
Div Non Decr Years20
5.3 Sustainability
23.65% 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.
DP23.65%
EPS Next 2Y14.86%
EPS Next 3Y15.79%
524.11
-9.39 (-1.76%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.47%
Inst Owner Change0.82%
Ins Owners0.03%
Ins Owner Change-0.03%
Market Cap3895.47B
Analysts84.41
Price Target539.76 (2.99%)
Short Float %0.72%
Short Ratio2.9
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.6% |
Yearly Dividend2.93
Dividend Growth(5Y)10.19%
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)3.15%
PT rev (3m)8.06%
EPS NQ rev (1m)0.05%
EPS NQ rev (3m)1.17%
EPS NY rev (1m)0.01%
EPS NY rev (3m)2.02%
Revenue NQ rev (1m)0.01%
Revenue NQ rev (3m)1.91%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.92%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 38.42 | ||
| Fwd PE | 34.05 | ||
| P/S | 13.83 | ||
| P/FCF | 54.4 | ||
| P/OCF | 28.61 | ||
| P/B | 11.34 | ||
| P/tB | 19.35 | ||
| EV/EBITDA | 23.95 |
EPS(TTM)13.64
EY2.6%
EPS(NY)15.39
Fwd EY2.94%
FCF(TTM)9.63
FCFY1.84%
OCF(TTM)18.32
OCFY3.5%
SpS37.9
BVpS46.21
TBVpS27.09
PEG (NY)2.99
PEG (5Y)2.04
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 | 10.41 |
F-Score5
WACC10.4%
ROIC/WACC2.12
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 Y12.85%
EPS Next 2Y14.86%
EPS Next 3Y15.79%
EPS Next 5Y14.31%
Revenue 1Y (TTM)14.93%
Revenue growth 3Y12.42%
Revenue growth 5Y14.52%
Sales Q2Q%18.1%
Revenue Next Year13.51%
Revenue Next 2Y13.97%
Revenue Next 3Y13.73%
Revenue Next 5Y12.22%
EBIT growth 1Y17.45%
EBIT growth 3Y15.52%
EBIT growth 5Y19.4%
EBIT Next Year42.94%
EBIT Next 3Y22.2%
EBIT Next 5Y22.1%
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%