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 282 industry peers in the Software industry. MSFT gets an excellent profitability rating and is at the same time showing great financial health properties. MSFT has a decent growth rate and is not valued too expensively. MSFT also has an excellent dividend rating. With these ratings, MSFT could be worth investigating further 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.
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 92.55% of its industry peers.
MSFT has a better Return On Equity (30.02%) than 90.78% 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 95.04% 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 12.26%.
| 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
The Profit Margin of MSFT (35.79%) is better than 96.10% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
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.
In the last couple of years the Operating Margin of MSFT has grown nicely.
Looking at the Gross Margin, with a value of 69.07%, MSFT is in line with its industry, outperforming 50.71% 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
MSFT has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
MSFT has about the same amout of shares outstanding than it did 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
MSFT has an Altman-Z score of 10.93. 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 10.93, MSFT belongs to the top of the industry, outperforming 85.82% of the companies in the same industry.
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.
MSFT has a Debt to FCF ratio of 1.18. This is in the better half of the industry: MSFT outperforms 73.40% of its industry peers.
A Debt/Equity ratio of 0.24 indicates that MSFT is not too dependend on debt financing.
MSFT has a Debt to Equity ratio (0.24) which is in line with its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.24 | ||
| Debt/FCF | 1.18 | ||
| Altman-Z | 10.93 |
ROIC/WACC2.52
WACC8.8%
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.
Looking at the Current ratio, with a value of 1.37, MSFT is in line with its industry, outperforming 43.62% 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 of 1.36. This is comparable to the rest of the industry: MSFT outperforms 43.62% of its industry peers.
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
The Earnings Per Share is expected to grow by 15.57% on average over the next years. This is quite good.
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 Y15.42%
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.
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
With a Price/Earnings ratio of 38.55, 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 65.96% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 27.45. MSFT is valued slightly more expensive when compared to this.
The Price/Forward Earnings ratio is 32.42, which means the current valuation is very expensive for MSFT.
62.06% of the companies in the same industry are more expensive than MSFT, based on the Price/Forward Earnings ratio.
MSFT's Price/Forward Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 21.90.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 38.55 | ||
| Fwd PE | 32.42 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, MSFT is valued a bit cheaper than 79.43% of the companies in the same industry.
60.64% 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 | 53.45 | ||
| EV/EBITDA | 23.78 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive 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 15.11% in the coming years.
PEG (NY)2.5
PEG (5Y)1.93
EPS Next 2Y14.15%
EPS Next 3Y15.11%
5. Dividend
5.1 Amount
With a yearly dividend of 0.67%, MSFT is not a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 16.21, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.20% of the companies listed 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 | 0.67% |
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
24.30% of the earnings are spent on dividend by MSFT. This is a low number and 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%
498.84
+7.75 (+1.58%)
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 Cap3707.65B
Analysts84.64
Price Target523.3 (4.9%)
Short Float %0.69%
Short Ratio2.39
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.67% |
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 | 38.55 | ||
| Fwd PE | 32.42 | ||
| P/S | 13.73 | ||
| P/FCF | 53.45 | ||
| P/OCF | 28.37 | ||
| P/B | 11.52 | ||
| P/tB | 20.76 | ||
| EV/EBITDA | 23.78 |
EPS(TTM)12.94
EY2.59%
EPS(NY)15.39
Fwd EY3.08%
FCF(TTM)9.33
FCFY1.87%
OCF(TTM)17.59
OCFY3.53%
SpS36.33
BVpS43.31
TBVpS24.03
PEG (NY)2.5
PEG (5Y)1.93
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 | 10.93 |
F-Score5
WACC8.8%
ROIC/WACC2.52
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%