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 283 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. MSFT also has an excellent dividend rating. These ratings would make MSFT suitable 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.
In the past 5 years MSFT has always been profitable.
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 92.58% of its industry peers.
MSFT has a better Return On Equity (30.02%) than 90.11% of its industry peers.
Looking at the Return On Invested Capital, with a value of 22.17%, MSFT belongs to the top of the industry, outperforming 95.41% of the companies in the same industry.
MSFT had an Average Return On Invested Capital over the past 3 years of 23.84%. This is significantly above the industry average of 12.21%.
| 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
Looking at the Profit Margin, with a value of 35.79%, MSFT belongs to the top of the industry, outperforming 95.41% of the companies in the same industry.
MSFT's Profit Margin has improved in the last couple of years.
Looking at the Operating Margin, with a value of 45.23%, MSFT belongs to the top of the industry, outperforming 98.94% of the companies in the same industry.
In the last couple of years the Operating Margin of MSFT has grown nicely.
Looking at the Gross Margin, with a value of 69.07%, MSFT is in line with its industry, outperforming 53.00% of the companies in the same industry.
MSFT's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 45.23% | ||
| PM (TTM) | 35.79% | ||
| GM | 69.07% |
OM growth 3Y2.39%
OM growth 5Y5.51%
PM growth 3Y-0.46%
PM growth 5Y2.89%
GM growth 3Y0.4%
GM growth 5Y1.15%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), MSFT is creating value.
Compared to 1 year ago, MSFT has about the same amount of shares outstanding.
Compared to 5 years ago, MSFT has less shares outstanding
MSFT has a better debt/assets ratio than last year.
2.2 Solvency
MSFT has an Altman-Z score of 10.34. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
With an excellent Altman-Z score value of 10.34, MSFT belongs to the best of the industry, outperforming 86.57% of the companies in the same industry.
The Debt to FCF ratio of MSFT is 1.18, which is an excellent value as it means it would take MSFT, only 1.18 years of fcf income to pay off all of its debts.
MSFT has a Debt to FCF ratio of 1.18. This is in the better half of the industry: MSFT outperforms 71.73% of its industry peers.
MSFT has a Debt/Equity ratio of 0.24. This is a healthy value indicating a solid balance between debt and equity.
Looking at the Debt to Equity ratio, with a value of 0.24, MSFT is in line with its industry, outperforming 43.82% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 10.34 |
ROIC/WACC2.04
WACC10.86%
2.3 Liquidity
MSFT has a Current Ratio of 1.37. This is a normal value and indicates that MSFT is financially healthy and should not expect problems in meeting its short term obligations.
MSFT has a Current ratio of 1.37. This is comparable to the rest of the industry: MSFT outperforms 43.11% of its industry peers.
A Quick Ratio of 1.36 indicates that MSFT should not have too much problems paying its short term obligations.
MSFT's Quick ratio of 1.36 is in line compared to the rest of the industry. MSFT outperforms 42.40% of its industry peers.
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 | 1.37 | ||
| Quick Ratio | 1.36 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 12.03% over the past year.
MSFT shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 19.98% yearly.
MSFT shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 14.13%.
Measured over the past years, MSFT shows a quite strong growth in Revenue. The Revenue has been growing by 14.26% on average per year.
EPS 1Y (TTM)12.03%
EPS 3Y14.01%
EPS 5Y19.98%
EPS Q2Q%17.69%
Revenue 1Y (TTM)14.13%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%13.27%
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 14.79% yearly.
MSFT is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 13.18% yearly.
EPS Next Y15.38%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
EPS Next 5Y14.79%
Revenue Next Year13.95%
Revenue Next 2Y13.7%
Revenue Next 3Y13.92%
Revenue Next 5Y13.18%
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.
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
MSFT is valuated quite expensively with a Price/Earnings ratio of 35.41.
66.43% of the companies in the same industry are more expensive than MSFT, based on the Price/Earnings ratio.
MSFT is valuated rather expensively when we compare the Price/Earnings ratio to 26.60, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 29.78, MSFT can be considered very expensive at the moment.
65.02% of the companies in the same industry are more expensive than MSFT, based on the Price/Forward Earnings ratio.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.43, MSFT is valued a bit more expensive.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 35.41 | ||
| Fwd PE | 29.78 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MSFT is valued cheaply inside the industry as 80.21% of the companies are valued more expensively.
MSFT's Price/Free Cash Flow is on the same level as the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 49.1 | ||
| EV/EBITDA | 22.2 |
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.
MSFT has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as MSFT's earnings are expected to grow with 15.04% in the coming years.
PEG (NY)2.3
PEG (5Y)1.77
EPS Next 2Y14.13%
EPS Next 3Y15.04%
5. Dividend
5.1 Amount
MSFT has a yearly dividend return of 0.73%, which is pretty low.
Compared to an average industry Dividend Yield of 14.22, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.23% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.36, MSFT's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.73% |
5.2 History
The dividend of MSFT is nicely growing with an annual growth rate of 10.19%!
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
24.30% 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.
DP24.3%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
458.17
-0.7 (-0.15%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.18%
Inst Owner Change1.44%
Ins Owners0.03%
Ins Owner Change-0.03%
Market Cap3406.03B
Analysts84.24
Price Target510.23 (11.36%)
Short Float %0.68%
Short Ratio1.99
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.73% |
Yearly Dividend2.93
Dividend Growth(5Y)10.19%
DP24.3%
Div Incr Years20
Div Non Decr Years20
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)3.56%
Min EPS beat(2)1.79%
Max EPS beat(2)5.34%
EPS beat(4)3
Avg EPS beat(4)2.53%
Min EPS beat(4)-1.43%
Max EPS beat(4)5.34%
EPS beat(8)7
Avg EPS beat(8)3.7%
EPS beat(12)9
Avg EPS beat(12)2.65%
EPS beat(16)12
Avg EPS beat(16)3.43%
Revenue beat(2)1
Avg Revenue beat(2)-0.18%
Min Revenue beat(2)-0.75%
Max Revenue beat(2)0.4%
Revenue beat(4)1
Avg Revenue beat(4)-0.53%
Min Revenue beat(4)-1.44%
Max Revenue beat(4)0.4%
Revenue beat(8)2
Avg Revenue beat(8)-0.25%
Revenue beat(12)3
Avg Revenue beat(12)-0.56%
Revenue beat(16)5
Avg Revenue beat(16)-0.31%
PT rev (1m)-0.08%
PT rev (3m)-0.66%
EPS NQ rev (1m)1.18%
EPS NQ rev (3m)1.24%
EPS NY rev (1m)1.97%
EPS NY rev (3m)1.95%
Revenue NQ rev (1m)1.9%
Revenue NQ rev (3m)1.55%
Revenue NY rev (1m)0.87%
Revenue NY rev (3m)0.77%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 35.41 | ||
| Fwd PE | 29.78 | ||
| P/S | 12.61 | ||
| P/FCF | 49.1 | ||
| P/OCF | 26.06 | ||
| P/B | 10.58 | ||
| P/tB | 19.07 | ||
| EV/EBITDA | 22.2 |
EPS(TTM)12.94
EY2.82%
EPS(NY)15.38
Fwd EY3.36%
FCF(TTM)9.33
FCFY2.04%
OCF(TTM)17.58
OCFY3.84%
SpS36.32
BVpS43.3
TBVpS24.02
PEG (NY)2.3
PEG (5Y)1.77
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.18% | ||
| ROE | 30.02% | ||
| ROCE | 27.24% | ||
| ROIC | 22.17% | ||
| ROICexc | 26.95% | ||
| ROICexgc | 44.08% | ||
| OM | 45.23% | ||
| PM (TTM) | 35.79% | ||
| GM | 69.07% | ||
| FCFM | 25.69% |
ROA(3y)18.24%
ROA(5y)17.55%
ROE(3y)37.2%
ROE(5y)38.43%
ROIC(3y)23.84%
ROIC(5y)22.71%
ROICexc(3y)35.43%
ROICexc(5y)40.49%
ROICexgc(3y)63.99%
ROICexgc(5y)78.75%
ROCE(3y)29.44%
ROCE(5y)28%
ROICexcg growth 3Y-19.4%
ROICexcg growth 5Y-12.98%
ROICexc growth 3Y-17.33%
ROICexc growth 5Y-7.77%
OM growth 3Y2.39%
OM growth 5Y5.51%
PM growth 3Y-0.46%
PM growth 5Y2.89%
GM growth 3Y0.4%
GM growth 5Y1.15%
F-Score5
Asset Turnover0.48
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Debt/EBITDA | 0.5 | ||
| Cap/Depr | 209.15% | ||
| Cap/Sales | 22.72% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 86.3% | ||
| Profit Quality | 71.78% | ||
| Current Ratio | 1.37 | ||
| Quick Ratio | 1.36 | ||
| Altman-Z | 10.34 |
F-Score5
WACC10.86%
ROIC/WACC2.04
Cap/Depr(3y)189.18%
Cap/Depr(5y)172.93%
Cap/Sales(3y)14.49%
Cap/Sales(5y)13.3%
Profit Quality(3y)85.27%
Profit Quality(5y)89.91%
High Growth Momentum
Growth
EPS 1Y (TTM)12.03%
EPS 3Y14.01%
EPS 5Y19.98%
EPS Q2Q%17.69%
EPS Next Y15.38%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
EPS Next 5Y14.79%
Revenue 1Y (TTM)14.13%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%13.27%
Revenue Next Year13.95%
Revenue Next 2Y13.7%
Revenue Next 3Y13.92%
Revenue Next 5Y13.18%
EBIT growth 1Y15.48%
EBIT growth 3Y16.11%
EBIT growth 5Y20.56%
EBIT Next Year40.13%
EBIT Next 3Y21.81%
EBIT Next 5Y19.44%
FCF growth 1Y20.83%
FCF growth 3Y9.69%
FCF growth 5Y14.13%
OCF growth 1Y56.65%
OCF growth 3Y15.6%
OCF growth 5Y17.83%