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. 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 could make MSFT a good candidate for dividend and quality investing.
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.
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
With an excellent Return On Assets value of 17.18%, MSFT belongs to the best of the industry, outperforming 92.61% of the companies in the same industry.
MSFT has a Return On Equity of 30.02%. This is amongst the best in the industry. MSFT outperforms 90.85% 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 95.07% 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 12.36%.
| 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.
With an excellent Operating Margin value of 45.23%, MSFT belongs to the best 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.
With a Gross Margin value of 69.07%, MSFT perfoms like the industry average, outperforming 51.06% of the companies in the same industry.
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 | 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.
The number of shares outstanding for MSFT remains at a similar level compared to 1 year ago.
Compared to 5 years ago, MSFT has less shares outstanding
MSFT has a better debt/assets ratio than last year.
2.2 Solvency
An Altman-Z score of 10.68 indicates that MSFT is not in any danger for bankruptcy at the moment.
MSFT has a Altman-Z score of 10.68. This is amongst the best in the industry. MSFT outperforms 85.92% of its industry peers.
MSFT has a debt to FCF ratio of 1.18. This is a very positive value and a sign of high solvency as it would only need 1.18 years to pay back of all of its debts.
The Debt to FCF ratio of MSFT (1.18) is better than 73.59% of its industry peers.
A Debt/Equity ratio of 0.24 indicates that MSFT is not too dependend on debt financing.
The Debt to Equity ratio of MSFT (0.24) is comparable to the rest of the industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 10.68 |
ROIC/WACC2.5
WACC8.88%
2.3 Liquidity
A Current Ratio of 1.37 indicates that MSFT should not have too much problems paying its short term obligations.
With a Current ratio value of 1.37, MSFT perfoms like the industry average, outperforming 43.66% of the companies in the same industry.
MSFT has a Quick Ratio of 1.36. 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 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.
Measured over the past years, MSFT shows a quite strong growth in Earnings Per Share. The EPS has been growing by 19.98% on average per year.
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
MSFT is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 15.57% yearly.
MSFT is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 13.26% yearly.
EPS Next Y15.42%
EPS Next 2Y14.15%
EPS Next 3Y15.11%
EPS Next 5Y15.57%
Revenue Next Year13.95%
Revenue Next 2Y13.72%
Revenue Next 3Y13.94%
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.
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
With a Price/Earnings ratio of 36.89, MSFT can be considered very expensive at the moment.
Compared to the rest of the industry, the Price/Earnings ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 65.49% of the companies listed in the same industry.
When comparing the Price/Earnings ratio of MSFT to the average of the S&P500 Index (26.35), we can say MSFT is valued slightly more expensively.
MSFT is valuated quite expensively with a Price/Forward Earnings ratio of 31.02.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 61.97% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of MSFT to the average of the S&P500 Index (22.19), we can say MSFT is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.89 | ||
| Fwd PE | 31.02 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MSFT is valued a bit cheaper than 79.23% 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 61.27% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 51.15 | ||
| EV/EBITDA | 23.11 |
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.
A more expensive valuation may be justified as MSFT's earnings are expected to grow with 15.11% in the coming years.
PEG (NY)2.39
PEG (5Y)1.85
EPS Next 2Y14.15%
EPS Next 3Y15.11%
5. Dividend
5.1 Amount
MSFT has a yearly dividend return of 0.69%, which is pretty low.
MSFT's Dividend Yield is rather good when compared to the industry average which is at 16.44. MSFT pays more dividend than 92.61% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.42, MSFT's dividend is way lower than the S&P500 average.
| 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
MSFT pays out 24.30% of its income as dividend. This is a sustainable payout ratio.
The dividend of MSFT is growing, but earnings are growing more, so the dividend growth is sustainable.
DP24.3%
EPS Next 2Y14.15%
EPS Next 3Y15.11%
477.4
-2.84 (-0.59%)
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 Cap3548.29B
Analysts84.64
Price Target523.3 (9.61%)
Short Float %0.78%
Short Ratio2.52
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)2.56%
PT rev (3m)2.04%
EPS NQ rev (1m)0%
EPS NQ rev (3m)0.76%
EPS NY rev (1m)0.03%
EPS NY rev (3m)1.99%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)1.55%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.8%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.89 | ||
| Fwd PE | 31.02 | ||
| P/S | 13.14 | ||
| P/FCF | 51.15 | ||
| P/OCF | 27.15 | ||
| P/B | 11.02 | ||
| P/tB | 19.87 | ||
| EV/EBITDA | 23.11 |
EPS(TTM)12.94
EY2.71%
EPS(NY)15.39
Fwd EY3.22%
FCF(TTM)9.33
FCFY1.95%
OCF(TTM)17.59
OCFY3.68%
SpS36.33
BVpS43.31
TBVpS24.03
PEG (NY)2.39
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 | 10.68 |
F-Score5
WACC8.88%
ROIC/WACC2.5
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 Y15.42%
EPS Next 2Y14.15%
EPS Next 3Y15.11%
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 2Y13.72%
Revenue Next 3Y13.94%
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%