MICROSOFT CORP (MSFT)

US5949181045 - Common Stock

432.68  +4.81 (+1.12%)

Premarket: 436.2 +3.52 (+0.81%)

Fundamental Rating

7

Overall MSFT gets a fundamental rating of 7 out of 10. We evaluated MSFT against 278 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 not overvalued while it is showing excellent growth. This is an interesting combination. Finally MSFT also has an excellent dividend rating. These ratings could make MSFT a good candidate for dividend and growth and quality investing.



8

1. Profitability

1.1 Basic Checks

MSFT had positive earnings in the past year.
MSFT had a positive operating cash flow in the past year.
Each year in the past 5 years MSFT has been profitable.
MSFT had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

Looking at the Return On Assets, with a value of 17.80%, MSFT belongs to the top of the industry, outperforming 96.01% of the companies in the same industry.
MSFT has a Return On Equity of 34.04%. This is amongst the best in the industry. MSFT outperforms 95.65% of its industry peers.
MSFT has a better Return On Invested Capital (22.99%) than 97.83% of its industry peers.
MSFT had an Average Return On Invested Capital over the past 3 years of 24.79%. This is significantly above the industry average of 9.99%.
Industry RankSector 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 97.10% of the companies in the same industry.
In the last couple of years the Profit Margin of MSFT has grown nicely.
The Operating Margin of MSFT (44.70%) is better than 100.00% of its industry peers.
MSFT's Operating Margin has improved in the last couple of years.
MSFT has a Gross Margin (69.89%) which is in line with its industry peers.
MSFT's Gross Margin has been stable in the last couple of years.
Industry RankSector 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%

8

2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so MSFT 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 10.09 indicates that MSFT is not in any danger for bankruptcy at the moment.
MSFT has a Altman-Z score of 10.09. This is amongst the best in the industry. MSFT outperforms 86.23% 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 72.10% of the companies in the same industry.
A Debt/Equity ratio of 0.33 indicates that MSFT is not too dependend on debt financing.
The Debt to Equity ratio of MSFT (0.33) is worse than 61.59% 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 RankSector Rank
Debt/Equity 0.33
Debt/FCF 1.25
Altman-Z 10.09
ROIC/WACC2.24
WACC10.24%

2.3 Liquidity

A Current Ratio of 1.24 indicates that MSFT should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.24, MSFT is doing worse than 64.49% of the companies in the same industry.
MSFT has a Quick Ratio of 1.23. This is a normal value and indicates that MSFT is financially healthy and should not expect problems in meeting its short term obligations.
The Quick ratio of MSFT (1.23) is worse than 63.41% 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 RankSector Rank
Current Ratio 1.24
Quick Ratio 1.23

7

3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 23.53% over the past year.
The Earnings Per Share has been growing by 20.38% on average over the past years. This is a very strong growth
Looking at the last year, MSFT shows a quite strong growth in Revenue. The Revenue has grown by 13.97% in the last year.
The Revenue has been growing by 13.94% on average over the past years. This is quite good.
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 16.40% on average per year.
The Revenue is expected to grow by 14.25% on average over the next years. This is quite good.
EPS Next Y22.63%
EPS Next 2Y17.44%
EPS Next 3Y16.76%
EPS Next 5Y16.4%
Revenue Next Year15.89%
Revenue Next 2Y15.11%
Revenue Next 3Y14.93%
Revenue Next 5Y14.25%

3.3 Evolution

The EPS growth rate is stable: in the next years the growth will be about the same than in the last years.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.

4

4. Valuation

4.1 Price/Earnings Ratio

Based on the Price/Earnings ratio of 37.46, the valuation of MSFT can be described as expensive.
Based on the Price/Earnings ratio, MSFT is valued a bit cheaper than the industry average as 67.39% of the companies are valued more expensively.
Compared to an average S&P500 Price/Earnings ratio of 28.24, MSFT is valued a bit more expensive.
Based on the Price/Forward Earnings ratio of 31.98, the valuation of MSFT can be described as expensive.
Based on the Price/Forward Earnings ratio, MSFT is valued a bit cheaper than 60.14% of the companies in the same industry.
MSFT is valuated expensively when we compare the Price/Forward Earnings ratio to 19.93, which is the current average of the S&P500 Index.
Industry RankSector Rank
PE 37.46
Fwd PE 31.98

4.2 Price Multiples

MSFT's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 78.26% of the companies 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 RankSector Rank
P/FCF 45.57
EV/EBITDA 25.04

4.3 Compensation for Growth

MSFT's PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
The excellent profitability rating of MSFT may justify a higher PE ratio.
MSFT's earnings are expected to grow with 16.76% in the coming years. This may justify a more expensive valuation.
PEG (NY)1.66
PEG (5Y)1.84
EPS Next 2Y17.44%
EPS Next 3Y16.76%

7

5. Dividend

5.1 Amount

With a yearly dividend of 0.69%, 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 8.26. MSFT pays more dividend than 92.75% of the companies in the same industry.
With a Dividend Yield of 0.69, MSFT pays less dividend than the S&P500 average, which is at 2.37.
Industry RankSector Rank
Dividend Yield 0.69%

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 their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)10%
Div Incr Years19
Div Non Decr Years19

5.3 Sustainability

MSFT pays out 24.66% 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.
DP24.66%
EPS Next 2Y17.44%
EPS Next 3Y16.76%

MICROSOFT CORP

NASDAQ:MSFT (6/11/2024, 7:03:51 PM)

Premarket: 436.2 +3.52 (+0.81%)

432.68

+4.81 (+1.12%)

Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)04-25 2024-04-25/amc
Earnings (Next)07-23 2024-07-23/amc
Inst Owners72.16%
Inst Owner Change-0.12%
Ins Owners5.99%
Ins Owner Change-0.03%
Market Cap3215.81B
Analysts86.46
Price Target494.34 (14.25%)
Dividend
Industry RankSector Rank
Dividend Yield 0.69%
Dividend Growth(5Y)10%
DP24.66%
Div Incr Years19
Div Non Decr Years19
Ex-Date05-15 2024-05-15 (0.75)
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)3.34%
PT rev (3m)5.94%
EPS NQ rev (1m)1.76%
EPS NQ rev (3m)1.91%
EPS NY rev (1m)1.28%
EPS NY rev (3m)4.65%
Revenue NQ rev (1m)-0.26%
Revenue NQ rev (3m)-0.38%
Revenue NY rev (1m)0.29%
Revenue NY rev (3m)0.59%
Valuation
Industry RankSector Rank
PE 37.46
Fwd PE 31.98
P/S 13.59
P/FCF 45.57
P/OCF 29.2
P/B 12.7
P/tB 30.58
EV/EBITDA 25.04
EPS(TTM)11.55
EY2.67%
EPS(NY)13.53
Fwd EY3.13%
FCF(TTM)9.5
FCFY2.19%
OCF(TTM)14.82
OCFY3.42%
SpS31.83
BVpS34.06
TBVpS14.15
PEG (NY)1.66
PEG (5Y)1.84
Profitability
Industry RankSector 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 RankSector 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 10.09
F-Score6
WACC10.24%
ROIC/WACC2.24
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 Y22.63%
EPS Next 2Y17.44%
EPS Next 3Y16.76%
EPS Next 5Y16.4%
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 5Y14.25%
EBIT growth 1Y23.02%
EBIT growth 3Y19.2%
EBIT growth 5Y20.67%
EBIT Next Year48.95%
EBIT Next 3Y25.44%
EBIT Next 5Y20.66%
FCF growth 1Y10.88%
FCF growth 3Y9.55%
FCF growth 5Y13.02%
OCF growth 1Y26.41%
OCF growth 3Y13.01%
OCF growth 5Y14.82%