MICROSOFT CORP (MSFT) Stock Fundamental Analysis
NASDAQ:MSFT - Nasdaq - US5949181045 - Common Stock - Currency: USD
MSFT gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 284 industry peers in the Software industry. MSFT has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. MSFT has a decent growth rate and is not valued too expensively. Finally MSFT also has an excellent dividend rating. This makes MSFT very considerable 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.
Each year in the past 5 years MSFT has been profitable.
Each year in the past 5 years MSFT had a positive operating cash flow.
1.2 Ratios
The Return On Assets of MSFT (17.18%) is better than 92.61% of its industry peers.
With an excellent Return On Equity value of 30.02%, MSFT belongs to the best of the industry, outperforming 90.85% of the companies in the same industry.
MSFT has a better Return On Invested Capital (22.17%) than 95.07% of its industry peers.
The Average Return On Invested Capital over the past 3 years 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
With an excellent Profit Margin value of 35.79%, MSFT belongs to the best of the industry, outperforming 96.13% of the companies in the same industry.
MSFT's Profit Margin has improved in the last couple of years.
The Operating Margin of MSFT (45.23%) is better than 98.94% of its industry peers.
MSFT's Operating Margin has improved in the last couple of years.
MSFT has a Gross Margin (69.07%) which 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
MSFT has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
Compared to 1 year ago, MSFT has about the same amount of shares outstanding.
MSFT has less shares outstanding than it did 5 years ago.
MSFT has a better debt/assets ratio than last year.
2.2 Solvency
MSFT has an Altman-Z score of 10.59. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 10.59, MSFT belongs to the top of the industry, outperforming 86.62% 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 73.94% of its industry peers.
A Debt/Equity ratio of 0.24 indicates that MSFT is not too dependend on debt financing.
MSFT's Debt to Equity ratio of 0.24 is in line compared to the rest of the industry. MSFT outperforms 45.42% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 10.59 |
ROIC/WACC2
WACC11.09%
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 43.66% 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 has a Quick ratio (1.36) which is comparable to the rest of the 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
MSFT shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 12.03%, which is quite good.
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
Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of 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 37.01, which means the current valuation is very expensive for MSFT.
MSFT's Price/Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 66.90% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 26.60. MSFT is valued slightly more expensive when compared to this.
A Price/Forward Earnings ratio of 31.13 indicates a quite expensive valuation of MSFT.
Based on the Price/Forward Earnings ratio, MSFT is valued a bit cheaper than 63.03% of the companies in the same industry.
MSFT's Price/Forward Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 22.39.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 37.01 | ||
| Fwd PE | 31.13 |
4.2 Price Multiples
MSFT's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 79.58% of the companies in the same industry.
MSFT's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 60.92% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 51.31 | ||
| EV/EBITDA | 22.87 |
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.
MSFT's earnings are expected to grow with 15.04% in the coming years. This may justify a more expensive valuation.
PEG (NY)2.41
PEG (5Y)1.85
EPS Next 2Y14.13%
EPS Next 3Y15.04%
5. Dividend
5.1 Amount
With a yearly dividend of 0.71%, 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 16.43. MSFT pays more dividend than 92.25% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, MSFT's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
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
MSFT pays out 24.30% 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.
DP24.3%
EPS Next 2Y14.13%
EPS Next 3Y15.04%
478.87
+6.25 (+1.32%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.18%
Inst Owner Change1.48%
Ins Owners0.03%
Ins Owner Change-0.03%
Market Cap3559.22B
Analysts84.64
Price Target516.4 (7.84%)
Short Float %0.77%
Short Ratio2.34
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
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)-0.39%
EPS NQ rev (3m)1.17%
EPS NY rev (1m)1.97%
EPS NY rev (3m)1.95%
Revenue NQ rev (1m)0.06%
Revenue NQ rev (3m)1.57%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.8%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 37.01 | ||
| Fwd PE | 31.13 | ||
| P/S | 13.18 | ||
| P/FCF | 51.31 | ||
| P/OCF | 27.23 | ||
| P/B | 11.06 | ||
| P/tB | 19.93 | ||
| EV/EBITDA | 22.87 |
EPS(TTM)12.94
EY2.7%
EPS(NY)15.38
Fwd EY3.21%
FCF(TTM)9.33
FCFY1.95%
OCF(TTM)17.59
OCFY3.67%
SpS36.33
BVpS43.31
TBVpS24.03
PEG (NY)2.41
PEG (5Y)1.85
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 | 10.59 |
F-Score5
WACC11.09%
ROIC/WACC2
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%