Microsoft Corp (MSFT, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $419.33, Microsoft Corp has witnessed a daily gain of 0.7%, marked against a three-month change of 13.01%. A thorough analysis, underlined by the GF Score, suggests that Microsoft Corp is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 5/10
- Momentum rank: 9/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, and a slightly lower GF Value rank, GuruFocus assigned Microsoft Corp the GF Score of 97 out of 100, which signals the highest outperformance potential.
Understanding Microsoft Corp Business
Microsoft Corp, with a market cap of $3.12 trillion and sales of $227.58 billion, is a titan in the technology sector. The company's operating margin stands at a robust 44.17%. Microsoft develops and licenses consumer and enterprise software, known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes, intelligence cloud, and more personal computing. These segments encompass a range of products and services, including legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics, infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server, Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops.
Financial Strength Breakdown
According to the Financial Strength rating, Microsoft Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Microsoft Corp stands impressively at 41.68, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 9.7, Microsoft Corp exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.39, Microsoft Corp's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Microsoft Corp's impressive standing among its peers in generating profit. Microsoft Corp's Operating Margin has increased over the past five years, with the latest figure standing at 41.77%. Furthermore, the company's Gross Margin has also seen a consistent rise, reaching 68.92% in 2023. This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms Microsoft Corp's solid financial situation, and its strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Microsoft Corp demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 15.1%, which outperforms better than 64.9% of companies in the Software industry. Moreover, Microsoft Corp has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years, with a three-year growth rate of 16.5 and a five-year rate of 18.5. This trend accentuates the company's continued capability to drive growth.
Next Steps
Considering Microsoft Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. Investors looking for similar opportunities can explore more companies with strong GF Scores using the GF Score Screen. With Microsoft Corp's consistent track record and strategic market positioning, it remains a compelling choice for value investors seeking growth and stability in their portfolios.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
