MICROSOFT CORP (MSFT) Stock Fundamental Analysis
NASDAQ:MSFT - Nasdaq - US5949181045 - Common Stock - Currency: USD
Overall MSFT gets a fundamental rating of 7 out of 10. We evaluated MSFT against 284 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 has a decent growth rate and is not valued too expensively. 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
In the past year MSFT was profitable.
MSFT had a positive operating cash flow in the past year.
MSFT had positive earnings in each of the past 5 years.
In the past 5 years MSFT always reported a positive cash flow from operatings.
1.2 Ratios
MSFT's Return On Assets of 17.18% is amongst the best of the industry. MSFT outperforms 92.61% of its industry peers.
MSFT's Return On Equity of 30.02% is amongst the best of the industry. MSFT outperforms 90.85% of its industry peers.
MSFT has a Return On Invested Capital of 22.17%. This is amongst the best in the industry. MSFT outperforms 95.07% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for MSFT is significantly above the industry average of 12.30%.
| 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
MSFT has a better Profit Margin (35.79%) than 96.13% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
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.
MSFT's Operating Margin has improved in the last couple of years.
The Gross Margin of MSFT (69.07%) is comparable to the rest of the 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
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 remains at a similar level compared to 1 year ago.
The number of shares outstanding for MSFT has been reduced compared to 5 years ago.
MSFT has a better debt/assets ratio than last year.
2.2 Solvency
An Altman-Z score of 10.63 indicates that MSFT is not in any danger for bankruptcy at the moment.
With an excellent Altman-Z score value of 10.63, MSFT belongs to the best of the industry, outperforming 86.97% 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.
Looking at the Debt to FCF ratio, with a value of 1.18, MSFT is in the better half of the industry, outperforming 73.59% 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.
Looking at the Debt to Equity ratio, with a value of 0.24, MSFT is in line with its industry, outperforming 45.42% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 10.63 |
ROIC/WACC2.49
WACC8.91%
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 (1.37) which is comparable to the rest of the industry.
A Quick Ratio of 1.36 indicates that MSFT should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.36, MSFT is in line with its industry, outperforming 43.66% 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 | 1.37 | ||
| 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%.
MSFT shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 14.26% yearly.
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
Based on estimates for the next years, MSFT will show a quite strong growth in Earnings Per Share. The EPS will grow by 15.57% on average per year.
Based on estimates for the next years, MSFT will show a quite strong growth in Revenue. The Revenue will grow by 13.26% on average per year.
EPS Next Y15.38%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
EPS Next 5Y15.57%
Revenue Next Year13.95%
Revenue Next 2Y13.71%
Revenue Next 3Y13.91%
Revenue Next 5Y13.26%
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
Based on the Price/Earnings ratio of 36.70, the valuation of MSFT can be described as expensive.
MSFT's Price/Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 65.49% of the companies in the same industry.
MSFT's Price/Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 26.31.
Based on the Price/Forward Earnings ratio of 30.88, the valuation of MSFT can be described as expensive.
61.27% of the companies in the same industry are more expensive than MSFT, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of MSFT to the average of the S&P500 Index (22.13), we can say MSFT is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.7 | ||
| Fwd PE | 30.88 |
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 79.23% of the companies listed in the same industry.
60.21% of the companies in the same industry are more expensive than MSFT, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 50.89 | ||
| EV/EBITDA | 22.99 |
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.
MSFT's earnings are expected to grow with 15.04% in the coming years. This may justify a more expensive valuation.
PEG (NY)2.39
PEG (5Y)1.84
EPS Next 2Y14.13%
EPS Next 3Y15.04%
5. Dividend
5.1 Amount
MSFT has a yearly dividend return of 0.69%, which is pretty low.
Compared to an average industry Dividend Yield of 16.93, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.61% of the companies listed in the same industry.
With a Dividend Yield of 0.69, MSFT pays less dividend than the S&P500 average, which is at 2.40.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.69% |
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 their dividend for at least 10 years, which is a reliable track record.
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.
MSFT's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP24.3%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
474.96
-3.91 (-0.82%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.47%
Inst Owner Change1.48%
Ins Owners0.03%
Ins Owner Change-0.03%
Market Cap3530.16B
Analysts84.64
Price Target516.4 (8.72%)
Short Float %0.77%
Short Ratio2.34
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.69% |
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)1.21%
PT rev (3m)0.69%
EPS NQ rev (1m)-0.06%
EPS NQ rev (3m)1.17%
EPS NY rev (1m)0%
EPS NY rev (3m)1.95%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)1.57%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.8%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.7 | ||
| Fwd PE | 30.88 | ||
| P/S | 13.07 | ||
| P/FCF | 50.89 | ||
| P/OCF | 27.01 | ||
| P/B | 10.97 | ||
| P/tB | 19.77 | ||
| EV/EBITDA | 22.99 |
EPS(TTM)12.94
EY2.72%
EPS(NY)15.38
Fwd EY3.24%
FCF(TTM)9.33
FCFY1.96%
OCF(TTM)17.59
OCFY3.7%
SpS36.33
BVpS43.31
TBVpS24.03
PEG (NY)2.39
PEG (5Y)1.84
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 | 10.63 |
F-Score5
WACC8.91%
ROIC/WACC2.49
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 5Y15.57%
Revenue 1Y (TTM)14.13%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%13.27%
Revenue Next Year13.95%
Revenue Next 2Y13.71%
Revenue Next 3Y13.91%
Revenue Next 5Y13.26%
EBIT growth 1Y15.48%
EBIT growth 3Y16.11%
EBIT growth 5Y20.56%
EBIT Next Year44.54%
EBIT Next 3Y24.22%
EBIT Next 5Y20.76%
FCF growth 1Y20.83%
FCF growth 3Y9.69%
FCF growth 5Y14.13%
OCF growth 1Y56.65%
OCF growth 3Y15.6%
OCF growth 5Y17.83%