Microsoft Corp (NASDAQ: MSFT)

Sector: Technology Industry: Software - Infrastructure CIK: 0000789019
Market Cap 3,197.34 Bn
P/B 8.18
P/E 26.81
P/S 10.47
ROIC (Qtr) 26.06
Div Yield % 0.79
Rev 1y % (Qtr) 16.72
Total Debt (Qtr) 57.61 Bn
Debt/Equity (Qtr) 0.15

About

Microsoft Corporation, commonly known as Microsoft, is a technology company that operates in the global technology industry. It was established in 1975 and has its headquarters in Redmond, Washington. Microsoft's ticker symbol is MSFT. Microsoft is a leading provider of software, services, and devices that enable people and businesses to achieve their full potential. The company's offerings are designed to make digital technology and artificial intelligence (AI) accessible to everyone while promoting responsible use and development of these technologies. Microsoft's...

Read more

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 160.51B provides robust 2.79x coverage of total debt 57.61B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 24.30B provide 5.02x coverage of short-term debt 4.84B, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 525.39B provides 9.12x coverage of total debt 57.61B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 160.51B provides strong 13.10x coverage of stock compensation 12.26B, indicating sustainable incentive practices.
  • Operating cash flow of 160.51B provides exceptional 60.73x coverage of interest expenses 2.64B, showing strong debt service capability.

Bear case

  • Operating cash flow of 160.51B barely covers its investment activities of (100.55B), with a coverage ratio of -1.60, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 160.51B provides thin coverage of dividend payments of (25.27B) with a -6.35 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (100.55B) provide weak support for R&D spending of 33.68B, which is -2.99x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 24.30B provide limited coverage of acquisition spending of (3.76B), which is -6.47x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 56.53B relative to inventory of 1.06B (53.39 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.

Peer comparison

Companies in the Software - Infrastructure
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MSFT Microsoft Corp 3,197.34 Bn 26.81 10.47 57.61 Bn
2 ORCL Oracle Corp 506.93 Bn 48.84 12.87 124.39 Bn
3 PLTR Palantir Technologies Inc. 341.64 Bn 311.89 87.69 0.24 Bn
4 PANW Palo Alto Networks Inc 118.39 Bn 105.97 12.39 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 109.19 Bn -347.56 23.92 0.82 Bn
6 SNPS Synopsys Inc 76.22 Bn 57.21 10.80 14.29 Bn
7 FTNT Fortinet, Inc. 62.40 Bn 33.30 9.52 1.00 Bn
8 NET Cloudflare, Inc. 60.91 Bn -591.17 30.25 3.50 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 4.85 2.43
EV to Cash from Ops. EV/CFO 20.12 11.30
EV to Debt EV to Debt 56.05 9.88
EV to EBIT EV/EBIT 21.64 -8.20
EV to EBITDA EV/EBITDA 17.48 8.19
EV to Free Cash Flow [EV/FCF] EV/FCF 41.71 30.23
EV to Market Cap EV to Market Cap 1.01 0.35
EV to Revenue EV/Rev 10.57 35.31
Price to Book Value [P/B] P/B 8.18 4.88
Price to Earnings [P/E] P/E 26.81 -13.51
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 4.72 0.26
Dividend Payout Ratio % Div Payout % (Qtr) 21.20 2.68
Dividend per Basic Share Div per Share (Qtr) 3.40 0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 32.64 1.68
Interest Coverage Int. cover (Qtr) 56.44 -11.94
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -49.58 -410.36
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 38.98 224.71
Dividend Growth (1y) % Div 1y % (Qtr) 10.39 -0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 27.89 18.75
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 29.05 42.50
EBIT Growth (1y) % EBIT 1y % (Qtr) 28.29 13.21
EBT Growth (1y) % EBT 1y % (Qtr) 28.98 7.35
EPS Growth (1y) % EPS 1y % (Qtr) 28.71 68.33
FCF Growth (1y) % FCF 1y % (Qtr) 10.54 293.84
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 15.29 47.71
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.46 0.68
Cash Payout Ratio Cash Payout (Qtr) 0.10 0.01
Cash Ratio Cash Ratio (Qtr) 0.19 1.21
Current Ratio Curr Ratio (Qtr) 1.39 2.59
Debt to Equity Ratio Debt/Equity (Qtr) 0.15 -0.95
Interest Cover Ratio Int Coverage (Qtr) 56.44 -11.94
Times Interest Earned Times Interest Earned (Qtr) 56.44 -11.94
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 62.70 -550.26
EBIT Margin % EBIT Margin % (Qtr) 48.84 -242.75
EBT Margin % EBT Margin % (Qtr) 47.97 -608.84
Gross Margin % Gross Margin % (Qtr) 68.60 52.38
Net Profit Margin % Net Margin % (Qtr) 39.00 -611.52