MICROSOFT CORP (MSFT)
US5949181045 - Common Stock
Overall MSFT gets a fundamental rating of 7 out of 10. We evaluated MSFT against 277 industry peers in the Software industry. MSFT scores excellent points on both the profitability and health parts. This is a solid base for a good stock. 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.
1. Profitability
1.1 Basic Checks
MSFT had positive earnings in the past year.
In the past year MSFT had a positive cash flow from operations.
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
With an excellent Return On Assets value of 17.80%, MSFT belongs to the best of the industry, outperforming 95.65% of the companies in the same industry.
MSFT has a better Return On Equity (34.04%) than 94.93% of its industry peers.
MSFT's Return On Invested Capital of 22.99% is amongst the best of the industry. MSFT outperforms 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 10.18%.
| Industry Rank | Sector 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 96.74% of the companies in the same industry.
MSFT's Profit Margin has improved in the last couple of years.
MSFT has a better Operating Margin (44.70%) than 100.00% of its industry peers.
MSFT's Operating Margin has improved in the last couple of years.
With a Gross Margin value of 69.89%, MSFT perfoms like the industry average, outperforming 56.88% 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 | 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%
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 less shares outstanding
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
MSFT has an Altman-Z score of 9.85. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
MSFT's Altman-Z score of 9.85 is amongst the best of the industry. MSFT outperforms 85.87% of its industry peers.
The Debt to FCF ratio of MSFT is 1.25, which is an excellent value as it means it would take MSFT, only 1.25 years of fcf income to pay off all of its debts.
MSFT's Debt to FCF ratio of 1.25 is fine compared to the rest of the industry. MSFT outperforms 73.55% of its industry peers.
A Debt/Equity ratio of 0.33 indicates that MSFT is not too dependend on debt financing.
MSFT has a Debt to Equity ratio of 0.33. This is in the lower half of the industry: MSFT underperforms 61.23% of its industry peers.
Although MSFT does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.33 | ||
| Debt/FCF | 1.25 | ||
| Altman-Z | 9.85 |
ROIC/WACC2.33
WACC9.85%
2.3 Liquidity
A Current Ratio of 1.24 indicates that MSFT should not have too much problems paying its short term obligations.
The Current ratio of MSFT (1.24) is worse than 63.77% of its industry peers.
A Quick Ratio of 1.23 indicates that MSFT should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.23, MSFT is doing worse than 63.41% 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 | 1.24 | ||
| Quick Ratio | 1.23 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 23.53% over the past year.
MSFT shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 20.38% yearly.
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 growth Q2Q20%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Revenue growth Q2Q17.03%
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 16.40% yearly.
The Revenue is expected to grow by 14.25% on average over the next years. This is quite good.
EPS Next Y21.09%
EPS Next 2Y17.89%
EPS Next 3Y17.93%
EPS Next 5Y16.4%
Revenue Next Year15.56%
Revenue Next 2Y14.94%
Revenue Next 3Y14.74%
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.
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 36.38, 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 70.29% of the companies are valued more expensively.
MSFT is valuated rather expensively when we compare the Price/Earnings ratio to 28.60, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 30.82, 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 65.22% of the companies in the same industry.
MSFT is valuated expensively when we compare the Price/Forward Earnings ratio to 20.15, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.38 | ||
| Fwd PE | 30.82 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MSFT is valued cheaply inside the industry as 81.88% of the companies are valued more expensively.
Based on the Price/Free Cash Flow ratio, MSFT is valued a bit cheaper than the industry average as 61.59% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 44.25 | ||
| EV/EBITDA | 24.3 |
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.
A more expensive valuation may be justified as MSFT's earnings are expected to grow with 17.93% in the coming years.
PEG (NY)1.73
PEG (5Y)1.78
EPS Next 2Y17.89%
EPS Next 3Y17.93%
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 12.31. MSFT pays more dividend than 92.03% of the companies in the same industry.
With a Dividend Yield of 0.71, MSFT pays less dividend than the S&P500 average, which is at 2.32.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
5.2 History
On average, the dividend of MSFT grows each year by 10.00%, which is quite nice.
MSFT has been paying a dividend for at least 10 years, so it has 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%
Div Incr Years18
Div Non Decr Years18
5.3 Sustainability
24.66% 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.
DP24.66%
EPS Next 2Y17.89%
EPS Next 3Y17.93%
MICROSOFT CORP
NASDAQ:MSFT (5/17/2024, 7:14:42 PM)
After market: 420.21 0 (0%)420.21
-0.78 (-0.19%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners72.16%
Inst Owner Change-0.13%
Ins Owners5.99%
Ins Owner Change-0.03%
Market Cap3123.13B
Analysts86.67
Price Target481.63 (14.62%)
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.71% |
Dividend Growth(5Y)10%
DP24.66%
Div Incr Years18
Div Non Decr Years18
Ex-Date
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)2.14%
PT rev (3m)13.36%
EPS NQ rev (1m)1.74%
EPS NQ rev (3m)1.89%
EPS NY rev (1m)0%
EPS NY rev (3m)3.33%
Revenue NQ rev (1m)-0.25%
Revenue NQ rev (3m)-0.37%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.31%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.38 | ||
| Fwd PE | 30.82 | ||
| P/S | 13.2 | ||
| P/FCF | 44.25 | ||
| P/OCF | 28.36 | ||
| P/B | 12.34 | ||
| P/tB | 29.7 | ||
| EV/EBITDA | 24.3 |
EPS(TTM)11.55
EY2.75%
EPS(NY)13.63
Fwd EY3.24%
FCF(TTM)9.5
FCFY2.26%
OCF(TTM)14.82
OCFY3.53%
SpS31.83
BVpS34.06
TBVpS14.15
PEG (NY)1.73
PEG (5Y)1.78
Profitability
| Industry Rank | Sector 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 Rank | Sector 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 | 9.85 |
F-Score6
WACC9.85%
ROIC/WACC2.33
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%
Growth
EPS 1Y (TTM)23.53%
EPS 3Y19.49%
EPS 5Y20.38%
EPS growth Q2Q20%
EPS Next Y21.09%
EPS Next 2Y17.89%
EPS Next 3Y17.93%
EPS Next 5Y16.4%
Revenue 1Y (TTM)13.97%
Revenue growth 3Y14.01%
Revenue growth 5Y13.94%
Revenue growth Q2Q17.03%
Revenue Next Year15.56%
Revenue Next 2Y14.94%
Revenue Next 3Y14.74%
Revenue Next 5Y14.25%
EBIT growth 1Y23.02%
EBIT growth 3Y19.2%
EBIT growth 5Y20.67%
EBIT Next Year45.68%
EBIT Next 3Y24.68%
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%