MICROSOFT CORP (MSFT)
US5949181045 - Common Stock
We assign a fundamental rating of 7 out of 10 to MSFT. MSFT was compared to 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 is not priced too expensively while it is growing strongly. Keep and eye on this one! Finally MSFT also has an excellent dividend rating. With these ratings, MSFT could be worth investigating further 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.
MSFT had positive earnings in each of the past 5 years.
MSFT had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
MSFT's Return On Assets of 17.21% is amongst the best of the industry. MSFT outperforms 96.11% of its industry peers.
MSFT's Return On Equity of 32.83% is amongst the best of the industry. MSFT outperforms 93.29% of its industry peers.
MSFT has a better Return On Invested Capital (22.63%) than 96.82% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for MSFT is significantly above the industry average of 10.33%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.21% | ||
| ROE | 32.83% | ||
| ROIC | 22.63% |
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's Profit Margin of 35.96% is amongst the best of the industry. MSFT outperforms 96.11% 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 44.64%, MSFT belongs to the best of the industry, outperforming 100.00% 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 69.76%, MSFT is in line with its industry, outperforming 54.42% of the companies in the same industry.
MSFT's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 44.64% | ||
| PM (TTM) | 35.96% | ||
| GM | 69.76% |
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.
The number of shares outstanding for MSFT has been reduced compared to 5 years ago.
The debt/assets ratio for MSFT has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 9.21 indicates that MSFT is not in any danger for bankruptcy at the moment.
MSFT has a better Altman-Z score (9.21) than 84.10% of its industry peers.
MSFT has a debt to FCF ratio of 1.06. This is a very positive value and a sign of high solvency as it would only need 1.06 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 1.06, MSFT is doing good in the industry, outperforming 73.85% of the companies in the same industry.
MSFT has a Debt/Equity ratio of 0.28. This is a healthy value indicating a solid balance between debt and equity.
MSFT's Debt to Equity ratio of 0.28 is on the low side compared to the rest of the industry. MSFT is outperformed by 60.78% of its industry peers.
Even though the debt/equity ratio score it not favorable for MSFT, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.28 | ||
| Debt/FCF | 1.06 | ||
| Altman-Z | 9.21 |
ROIC/WACC2.43
WACC9.32%
2.3 Liquidity
MSFT has a Current Ratio of 1.27. 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 worse Current ratio (1.27) than 61.13% of its industry peers.
MSFT has a Quick Ratio of 1.27. 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 1.27. This is in the lower half of the industry: MSFT underperforms 60.42% of its industry peers.
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 | 1.27 | ||
| Quick Ratio | 1.27 |
3. Growth
3.1 Past
MSFT shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 20.39%, which is quite impressive.
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 15.67%.
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)20.39%
EPS 3Y14.01%
EPS 5Y19.98%
EPS Q2Q%9.67%
Revenue 1Y (TTM)15.67%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%15.2%
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 14.16% yearly.
MSFT is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 12.35% yearly.
EPS Next Y12.94%
EPS Next 2Y14.7%
EPS Next 3Y15.77%
EPS Next 5Y14.16%
Revenue Next Year13.92%
Revenue Next 2Y14.1%
Revenue Next 3Y14.27%
Revenue Next 5Y12.35%
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
Based on the Price/Earnings ratio of 34.01, the valuation of MSFT can be described as expensive.
Based on the Price/Earnings ratio, MSFT is valued a bit cheaper than 69.26% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 29.62, MSFT is valued at the same level.
The Price/Forward Earnings ratio is 30.12, which means the current valuation is very expensive for MSFT.
Compared to the rest of the industry, the Price/Forward Earnings ratio of MSFT indicates a somewhat cheap valuation: MSFT is cheaper than 63.60% 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 (21.22), we can say MSFT is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 34.01 | ||
| Fwd PE | 30.12 |
4.2 Price Multiples
78.09% of the companies in the same industry are more expensive than MSFT, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, MSFT is valued a bit cheaper than the industry average as 63.25% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 40.31 | ||
| EV/EBITDA | 22.58 |
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.
A more expensive valuation may be justified as MSFT's earnings are expected to grow with 15.77% in the coming years.
PEG (NY)2.63
PEG (5Y)1.7
EPS Next 2Y14.7%
EPS Next 3Y15.77%
5. Dividend
5.1 Amount
With a yearly dividend of 0.73%, 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 12.20. MSFT pays more dividend than 92.58% of the companies in the same industry.
With a Dividend Yield of 0.73, MSFT pays less dividend than the S&P500 average, which is at 2.26.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.73% |
5.2 History
On average, the dividend of MSFT grows each year by 10.19%, 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)10.19%
Div Incr Years19
Div Non Decr Years19
5.3 Sustainability
MSFT pays out 24.70% 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.
DP24.7%
EPS Next 2Y14.7%
EPS Next 3Y15.77%
MICROSOFT CORP
NASDAQ:MSFT (9/6/2024, 8:00:02 PM)
After market: 400.07 -1.63 (-0.41%)401.7
-6.69 (-1.64%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners71.39%
Inst Owner Change-1.07%
Ins Owners5.99%
Ins Owner Change-0.01%
Market Cap2985.56B
Analysts86.35
Price Target507.64 (26.37%)
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 0.73% |
Dividend Growth(5Y)10.19%
DP24.7%
Div Incr Years19
Div Non Decr Years19
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)0.42%
Min EPS beat(2)-1.43%
Max EPS beat(2)2.27%
EPS beat(4)3
Avg EPS beat(4)3.65%
Min EPS beat(4)-1.43%
Max EPS beat(4)10.49%
EPS beat(8)6
Avg EPS beat(8)3.11%
EPS beat(12)8
Avg EPS beat(12)2.68%
EPS beat(16)12
Avg EPS beat(16)5.47%
Revenue beat(2)0
Avg Revenue beat(2)-0.85%
Min Revenue beat(2)-1.44%
Max Revenue beat(2)-0.26%
Revenue beat(4)1
Avg Revenue beat(4)-0.15%
Min Revenue beat(4)-1.44%
Max Revenue beat(4)1.63%
Revenue beat(8)2
Avg Revenue beat(8)-0.37%
Revenue beat(12)3
Avg Revenue beat(12)-0.55%
Revenue beat(16)6
Avg Revenue beat(16)0.15%
PT rev (1m)1.83%
PT rev (3m)5.45%
EPS NQ rev (1m)-2.23%
EPS NQ rev (3m)-2.37%
EPS NY rev (1m)-1.48%
EPS NY rev (3m)-2.16%
Revenue NQ rev (1m)-1.24%
Revenue NQ rev (3m)-1.19%
Revenue NY rev (1m)-0.36%
Revenue NY rev (3m)-0.06%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 34.01 | ||
| Fwd PE | 30.12 | ||
| P/S | 12.18 | ||
| P/FCF | 40.31 | ||
| P/OCF | 25.18 | ||
| P/B | 11.12 | ||
| P/tB | 24.54 | ||
| EV/EBITDA | 22.58 |
EPS(TTM)11.81
EY2.94%
EPS(NY)13.34
Fwd EY3.32%
FCF(TTM)9.97
FCFY2.48%
OCF(TTM)15.95
OCFY3.97%
SpS32.98
BVpS36.12
TBVpS16.37
PEG (NY)2.63
PEG (5Y)1.7
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 17.21% | ||
| ROE | 32.83% | ||
| ROCE | 28.29% | ||
| ROIC | 22.63% | ||
| ROICexc | 28.01% | ||
| ROICexgc | 52.03% | ||
| OM | 44.64% | ||
| PM (TTM) | 35.96% | ||
| GM | 69.76% | ||
| FCFM | 30.22% |
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-Score6
Asset Turnover0.48
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.28 | ||
| Debt/FCF | 1.06 | ||
| Debt/EBITDA | 0.56 | ||
| Cap/Depr | 199.57% | ||
| Cap/Sales | 18.14% | ||
| Interest Coverage | 64.37 | ||
| Cash Conversion | 90% | ||
| Profit Quality | 84.04% | ||
| Current Ratio | 1.27 | ||
| Quick Ratio | 1.27 | ||
| Altman-Z | 9.21 |
F-Score6
WACC9.32%
ROIC/WACC2.43
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)20.39%
EPS 3Y14.01%
EPS 5Y19.98%
EPS Q2Q%9.67%
EPS Next Y12.94%
EPS Next 2Y14.7%
EPS Next 3Y15.77%
EPS Next 5Y14.16%
Revenue 1Y (TTM)15.67%
Revenue growth 3Y13.4%
Revenue growth 5Y14.26%
Sales Q2Q%15.2%
Revenue Next Year13.92%
Revenue Next 2Y14.1%
Revenue Next 3Y14.27%
Revenue Next 5Y12.35%
EBIT growth 1Y22.01%
EBIT growth 3Y16.11%
EBIT growth 5Y20.56%
EBIT Next Year37.62%
EBIT Next 3Y21.37%
EBIT Next 5Y18.51%
FCF growth 1Y24.54%
FCF growth 3Y9.69%
FCF growth 5Y14.13%
OCF growth 1Y35.36%
OCF growth 3Y15.6%
OCF growth 5Y17.83%