MICROSOFT CORP (MSFT) Stock Fundamental Analysis
NASDAQ:MSFT - Nasdaq - US5949181045 - Common Stock - Currency: USD
Taking everything into account, MSFT scores 7 out of 10 in our fundamental rating. MSFT was compared to 283 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. 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
In the past year MSFT was profitable.
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
Looking at the Return On Assets, with a value of 17.18%, MSFT belongs to the top of the industry, outperforming 92.93% of the companies in the same industry.
With an excellent Return On Equity value of 30.02%, MSFT belongs to the best of the industry, outperforming 89.75% of the companies in the same industry.
With an excellent Return On Invested Capital value of 22.17%, MSFT belongs to the best of the industry, outperforming 95.41% 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 12.03%.
| 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 95.41% of its industry peers.
MSFT's Profit Margin has improved in the last couple of years.
MSFT has a Operating Margin of 45.23%. This is amongst the best in the industry. MSFT outperforms 99.29% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.
MSFT has a Gross Margin (69.07%) which is comparable to the rest of the 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.
Compared to 1 year ago, MSFT has about the same amount of shares outstanding.
Compared to 5 years ago, MSFT has less shares outstanding
MSFT has a better debt/assets ratio than last year.
2.2 Solvency
MSFT has an Altman-Z score of 9.90. 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 9.90, MSFT belongs to the top of the industry, outperforming 87.99% 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.
With a decent Debt to FCF ratio value of 1.18, MSFT is doing good in the industry, outperforming 72.08% 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.
With a Debt to Equity ratio value of 0.24, MSFT perfoms like the industry average, outperforming 44.17% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 9.9 |
ROIC/WACC2.08
WACC10.66%
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 42.40% of the companies in the same industry.
A Quick Ratio of 1.36 indicates that MSFT should not have too much problems paying its short term obligations.
With a Quick ratio value of 1.36, MSFT perfoms like the industry average, outperforming 41.70% of the companies in the same industry.
The current and quick ratio evaluation for MSFT is rather negative, while it does have 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.
The Earnings Per Share has been growing by 19.98% on average over the past years. This is quite good.
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 14.79% yearly.
The Revenue is expected to grow by 13.18% on average over the next years. This is quite good.
EPS Next Y13.15%
EPS Next 2Y13.44%
EPS Next 3Y14.7%
EPS Next 5Y14.79%
Revenue Next Year12.92%
Revenue Next 2Y13.14%
Revenue Next 3Y13.68%
Revenue Next 5Y13.18%
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
A Price/Earnings ratio of 33.71 indicates a quite expensive valuation of MSFT.
Compared to the rest of the industry, the Price/Earnings ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 65.72% of the companies listed in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 28.10, MSFT is valued at the same level.
With a Price/Forward Earnings ratio of 28.70, MSFT can be considered very expensive at the moment.
MSFT's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. MSFT is cheaper than 67.84% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of MSFT to the average of the S&P500 Index (20.74), we can say MSFT is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 33.71 | ||
| Fwd PE | 28.7 |
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 60.78% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 46.75 | ||
| EV/EBITDA | 21.05 |
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 14.70% in the coming years. This may justify a more expensive valuation.
PEG (NY)2.56
PEG (5Y)1.69
EPS Next 2Y13.44%
EPS Next 3Y14.7%
5. Dividend
5.1 Amount
With a yearly dividend of 0.76%, MSFT is not a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 14.58, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.58% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.43, MSFT's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.76% |
5.2 History
The dividend of MSFT is nicely growing with an annual growth rate of 10.19%!
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)10.19%
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 2Y13.44%
EPS Next 3Y14.7%
436.17
+0.89 (+0.2%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners74.18%
Inst Owner Change0.59%
Ins Owners0.03%
Ins Owner Change-0.01%
Market Cap3242.48B
Analysts84.24
Price Target499.5 (14.52%)
Short Float %0.69%
Short Ratio2.05
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.76% |
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)3.57%
Min EPS beat(2)1.79%
Max EPS beat(2)5.36%
EPS beat(4)3
Avg EPS beat(4)2.54%
Min EPS beat(4)-1.43%
Max EPS beat(4)5.36%
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)-0.19%
Min Revenue beat(2)-0.75%
Max Revenue beat(2)0.37%
Revenue beat(4)1
Avg Revenue beat(4)-0.54%
Min Revenue beat(4)-1.44%
Max Revenue beat(4)0.37%
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)-0.32%
PT rev (1m)-2.59%
PT rev (3m)-2.75%
EPS NQ rev (1m)-0.49%
EPS NQ rev (3m)0.99%
EPS NY rev (1m)0.02%
EPS NY rev (3m)0.85%
Revenue NQ rev (1m)-0.53%
Revenue NQ rev (3m)-1.56%
Revenue NY rev (1m)-0.1%
Revenue NY rev (3m)-0.65%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 33.71 | ||
| Fwd PE | 28.7 | ||
| P/S | 12.01 | ||
| P/FCF | 46.75 | ||
| P/OCF | 24.81 | ||
| P/B | 10.07 | ||
| P/tB | 18.16 | ||
| EV/EBITDA | 21.05 |
EPS(TTM)12.94
EY2.97%
EPS(NY)15.2
Fwd EY3.48%
FCF(TTM)9.33
FCFY2.14%
OCF(TTM)17.58
OCFY4.03%
SpS36.32
BVpS43.3
TBVpS24.02
PEG (NY)2.56
PEG (5Y)1.69
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 | 9.9 |
F-Score5
WACC10.66%
ROIC/WACC2.08
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 Y13.15%
EPS Next 2Y13.44%
EPS Next 3Y14.7%
EPS Next 5Y14.79%
Revenue 1Y (TTM)14.13%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%13.27%
Revenue Next Year12.92%
Revenue Next 2Y13.14%
Revenue Next 3Y13.68%
Revenue Next 5Y13.18%
EBIT growth 1Y15.48%
EBIT growth 3Y16.11%
EBIT growth 5Y20.56%
EBIT Next Year40.13%
EBIT Next 3Y21.81%
EBIT Next 5Y19.44%
FCF growth 1Y20.83%
FCF growth 3Y9.69%
FCF growth 5Y14.13%
OCF growth 1Y56.65%
OCF growth 3Y15.6%
OCF growth 5Y17.83%