MICROSOFT CORP (MSFT)
US5949181045 - Common Stock
We assign a fundamental rating of 7 out of 10 to MSFT. MSFT was compared to 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 is not overvalued while it is showing excellent growth. This is an interesting combination. MSFT also has an excellent dividend rating. These ratings could make MSFT a good candidate for dividend and growth 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.
In the past 5 years MSFT always reported a positive cash flow from operatings.
1.2 Ratios
MSFT has a Return On Assets of 17.80%. This is amongst the best in the industry. MSFT outperforms 96.11% of its industry peers.
Looking at the Return On Equity, with a value of 34.04%, MSFT belongs to the top of the industry, outperforming 95.41% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 22.99%, MSFT belongs to the top of the industry, outperforming 97.88% 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 9.85%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.8% | ||
| ROE | 34.04% | ||
| ROIC | 22.99% |
ROA(3y)18.62%
ROA(5y)16.85%
ROE(3y)40.64%
ROE(5y)39.54%
ROIC(3y)24.79%
ROIC(5y)22.08%
1.3 Margins
With an excellent Profit Margin value of 36.43%, MSFT belongs to the best of the industry, outperforming 96.47% of the companies in the same industry.
MSFT's Profit Margin has improved in the last couple of years.
MSFT has a Operating Margin of 44.70%. This is amongst the best in the industry. MSFT outperforms 100.00% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.
MSFT's Gross Margin of 69.89% is in line compared to the rest of the industry. MSFT outperforms 56.18% 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 | 44.7% | ||
| PM (TTM) | 36.43% | ||
| GM | 69.89% |
OM growth 3Y4.56%
OM growth 5Y5.91%
PM growth 3Y3.32%
PM growth 5Y17.86%
GM growth 3Y0.56%
GM growth 5Y1.1%
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 has been reduced compared to 1 year ago.
MSFT has less shares outstanding than it did 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 9.81 indicates that MSFT is not in any danger for bankruptcy at the moment.
With an excellent Altman-Z score value of 9.81, MSFT belongs to the best of the industry, outperforming 84.81% of the companies in the same industry.
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.
The Debt to FCF ratio of MSFT (1.25) is better than 73.14% of its industry peers.
A Debt/Equity ratio of 0.33 indicates that MSFT is not too dependend on debt financing.
MSFT's Debt to Equity ratio of 0.33 is on the low side compared to the rest of the industry. MSFT is outperformed by 63.25% of its industry peers.
Even though the debt/equity ratio score it not favorable for MSFT, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.33 | ||
| Debt/FCF | 1.25 | ||
| Altman-Z | 9.81 |
ROIC/WACC2.3
WACC9.99%
2.3 Liquidity
MSFT has a Current Ratio of 1.24. 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 1.24. This is in the lower half of the industry: MSFT underperforms 63.60% of its industry peers.
A Quick Ratio of 1.23 indicates that MSFT should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.23, MSFT is doing worse than 62.90% 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.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.24 | ||
| Quick Ratio | 1.23 |
3. Growth
3.1 Past
MSFT shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 23.53%, which is quite impressive.
Measured over the past years, MSFT shows a very strong growth in Earnings Per Share. The EPS has been growing by 20.38% on average per year.
The Revenue has grown by 13.97% 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 13.94% yearly.
EPS 1Y (TTM)23.53%
EPS 3Y19.49%
EPS 5Y20.38%
EPS Q2Q%20%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Sales Q2Q%17.03%
3.2 Future
Based on estimates for the next years, MSFT will show a quite strong growth in Earnings Per Share. The EPS will grow by 16.49% on average per year.
The Revenue is expected to grow by 14.28% on average over the next years. This is quite good.
EPS Next Y22.67%
EPS Next 2Y17.48%
EPS Next 3Y16.82%
EPS Next 5Y16.49%
Revenue Next Year15.89%
Revenue Next 2Y15.11%
Revenue Next 3Y14.93%
Revenue Next 5Y14.28%
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
A Price/Earnings ratio of 36.82 indicates a quite expensive valuation of MSFT.
MSFT's Price/Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 69.26% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 24.41, MSFT is valued quite expensively.
A Price/Forward Earnings ratio of 31.41 indicates a quite expensive valuation of MSFT.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 63.60% of the companies listed in the same industry.
MSFT's Price/Forward Earnings ratio indicates a rather expensive valuation when compared to the S&P500 average which is at 20.59.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.82 | ||
| Fwd PE | 31.41 |
4.2 Price Multiples
80.57% of the companies in the same industry are more expensive than MSFT, based on the Enterprise Value to EBITDA ratio.
MSFT's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 64.31% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 44.78 | ||
| EV/EBITDA | 24.19 |
4.3 Compensation for Growth
MSFT's PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
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 16.82% in the coming years.
PEG (NY)1.62
PEG (5Y)1.81
EPS Next 2Y17.48%
EPS Next 3Y16.82%
5. Dividend
5.1 Amount
MSFT has a yearly dividend return of 0.68%, which is pretty low.
MSFT's Dividend Yield is rather good when compared to the industry average which is at 8.31. MSFT pays more dividend than 93.29% of the companies in the same industry.
With a Dividend Yield of 0.68, MSFT pays less dividend than the S&P500 average, which is at 2.30.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.68% |
5.2 History
The dividend of MSFT is nicely growing with an annual growth rate of 10.00%!
MSFT has been paying a dividend for at least 10 years, so it has 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%
Div Incr Years19
Div Non Decr Years19
5.3 Sustainability
24.66% 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.
DP24.66%
EPS Next 2Y17.48%
EPS Next 3Y16.82%
MICROSOFT CORP
NASDAQ:MSFT (7/26/2024, 7:45:33 PM)
After market: 425.44 +0.17 (+0.04%)425.27
+6.87 (+1.64%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners72.17%
Inst Owner Change0%
Ins Owners5.99%
Ins Owner Change-0.03%
Market Cap3160.74B
Analysts86.77
Price Target498.75 (17.28%)
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.68% |
Dividend Growth(5Y)10%
DP24.66%
Div Incr Years19
Div Non Decr Years19
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2.77%
Min EPS beat(2)2.27%
Max EPS beat(2)3.27%
EPS beat(4)4
Avg EPS beat(4)4.86%
Min EPS beat(4)2.27%
Max EPS beat(4)10.49%
EPS beat(8)6
Avg EPS beat(8)2.7%
EPS beat(12)9
Avg EPS beat(12)3.72%
EPS beat(16)13
Avg EPS beat(16)5.98%
Revenue beat(2)0
Avg Revenue beat(2)-0.39%
Min Revenue beat(2)-0.51%
Max Revenue beat(2)-0.26%
Revenue beat(4)1
Avg Revenue beat(4)0.04%
Min Revenue beat(4)-0.69%
Max Revenue beat(4)1.63%
Revenue beat(8)2
Avg Revenue beat(8)-0.57%
Revenue beat(12)4
Avg Revenue beat(12)-0.24%
Revenue beat(16)7
Avg Revenue beat(16)0.37%
PT rev (1m)0.89%
PT rev (3m)5.78%
EPS NQ rev (1m)-0.01%
EPS NQ rev (3m)1.75%
EPS NY rev (1m)0%
EPS NY rev (3m)1.31%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-0.26%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.28%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.82 | ||
| Fwd PE | 31.41 | ||
| P/S | 13.36 | ||
| P/FCF | 44.78 | ||
| P/OCF | 28.7 | ||
| P/B | 12.49 | ||
| P/tB | 30.06 | ||
| EV/EBITDA | 24.19 |
EPS(TTM)11.55
EY2.72%
EPS(NY)13.54
Fwd EY3.18%
FCF(TTM)9.5
FCFY2.23%
OCF(TTM)14.82
OCFY3.48%
SpS31.83
BVpS34.06
TBVpS14.15
PEG (NY)1.62
PEG (5Y)1.81
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.8% | ||
| ROE | 34.04% | ||
| ROCE | 28.92% | ||
| ROIC | 22.99% | ||
| ROICexc | 28.99% | ||
| ROICexgc | 56.1% | ||
| OM | 44.7% | ||
| PM (TTM) | 36.43% | ||
| GM | 69.89% | ||
| FCFM | 29.83% |
ROA(3y)18.62%
ROA(5y)16.85%
ROE(3y)40.64%
ROE(5y)39.54%
ROIC(3y)24.79%
ROIC(5y)22.08%
ROICexc(3y)43.96%
ROICexc(5y)44.65%
ROICexgc(3y)82.27%
ROICexgc(5y)92%
ROCE(3y)29.52%
ROCE(5y)26.3%
ROICexcg growth 3Y-15.78%
ROICexcg growth 5Y-13.2%
ROICexc growth 3Y-7.29%
ROICexc growth 5Y-2.79%
OM growth 3Y4.56%
OM growth 5Y5.91%
PM growth 3Y3.32%
PM growth 5Y17.86%
GM growth 3Y0.56%
GM growth 5Y1.1%
F-Score6
Asset Turnover0.49
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.33 | ||
| Debt/FCF | 1.25 | ||
| Debt/EBITDA | 0.67 | ||
| Cap/Depr | 199.92% | ||
| Cap/Sales | 16.72% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 87.72% | ||
| Profit Quality | 81.89% | ||
| Current Ratio | 1.24 | ||
| Quick Ratio | 1.23 | ||
| Altman-Z | 9.81 |
F-Score6
WACC9.99%
ROIC/WACC2.3
Cap/Depr(3y)181.48%
Cap/Depr(5y)156.86%
Cap/Sales(3y)12.53%
Cap/Sales(5y)11.89%
Profit Quality(3y)87.78%
Profit Quality(5y)92.6%
High Growth Momentum
Growth
EPS 1Y (TTM)23.53%
EPS 3Y19.49%
EPS 5Y20.38%
EPS Q2Q%20%
EPS Next Y22.67%
EPS Next 2Y17.48%
EPS Next 3Y16.82%
EPS Next 5Y16.49%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Sales Q2Q%17.03%
Revenue Next Year15.89%
Revenue Next 2Y15.11%
Revenue Next 3Y14.93%
Revenue Next 5Y14.28%
EBIT growth 1Y23.02%
EBIT growth 3Y19.2%
EBIT growth 5Y20.67%
EBIT Next Year49.01%
EBIT Next 3Y25.49%
EBIT Next 5Y20.9%
FCF growth 1Y10.88%
FCF growth 3Y9.55%
FCF growth 5Y13.02%
OCF growth 1Y26.41%
OCF growth 3Y13.01%
OCF growth 5Y14.82%