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Microsoft Corp (NAS:MSFT)
Piotroski F-Score
5 (As of Today)

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Microsoft Corp has an F-score of 5 indicating the company's financial situation is typical for a stable company.

MSFT' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 5

4
8

During the past 13 years, the highest Piotroski F-Score of Microsoft Corp was 8. The lowest was 4. And the median was 6.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 3756 + 3122 + 4690 + 5200 = $16,768 Mil.
Cash Flow from Operations was 10367 + 8464 + 11549 + 6293 = $36,673 Mil.
Revenue was 20531 + 20614 + 20453 + 24090 = $85,688 Mil.
Gross Profit was 12809 + 12635 + 12609 + 14189 = $52,242 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(180098 + 181869 + 193694 + 212524 + 224610) / 5 = $198559 Mil.
Total Assets at the begining of this year (Dec15) was $180,098 Mil.
Long-Term Debt was $59,306 Mil.
Total Current Assets was $144,949 Mil.
Total Current Liabilities was $70,787 Mil.
Net Income was 4985 + -3195 + 4902 + 5018 = $11,710 Mil.

Revenue was 21729 + 22180 + 20379 + 23796 = $88,084 Mil.
Gross Profit was 14568 + 14712 + 13172 + 13924 = $56,376 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(174848 + 176683 + 174472 + 172896 + 180098) / 5 = $175799.4 Mil.
Total Assets at the begining of last year (Dec14) was $174,848 Mil.
Long-Term Debt was $40,679 Mil.
Total Current Assets was $127,812 Mil.
Total Current Liabilities was $42,643 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Microsoft Corp's current net income (TTM) was 16,768. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Microsoft Corp's current cash flow from operations (TTM) was 36,673. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Dec15)
=16768/180098
=0.09310487

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=11710/174848
=0.06697246

Microsoft Corp's return on assets of this year was 0.09310487. Microsoft Corp's return on assets of last year was 0.06697246. ==> This year is higher. ==> Score 1.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Microsoft Corp's current net income (TTM) was 16,768. Microsoft Corp's current cash flow from operations (TTM) was 36,673. ==> 36,673 > 16,768 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=59306/198559
=0.298682

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=40679/175799.4
=0.23139442

Microsoft Corp's gearing of this year was 0.298682. Microsoft Corp's gearing of last year was 0.23139442. ==> Last year is lower than this year ==> Score 0.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Dec16)=Total Current Assets/Total Current Liabilities
=144949/70787
=2.04767825

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=127812/42643
=2.99725629

Microsoft Corp's current ratio of this year was 2.04767825. Microsoft Corp's current ratio of last year was 2.99725629. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Microsoft Corp's number of shares in issue this year was 7830. Microsoft Corp's number of shares in issue last year was 8051. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=52242/85688
=0.60967697

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=56376/88084
=0.64002543

Microsoft Corp's gross margin of this year was 0.60967697. Microsoft Corp's gross margin of last year was 0.64002543. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Dec15)
=85688/180098
=0.47578541

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=88084/174848
=0.50377471

Microsoft Corp's asset turnover of this year was 0.47578541. Microsoft Corp's asset turnover of last year was 0.50377471. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+1+1+0+0+1+0+0
=5

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Microsoft Corp has an F-score of 5 indicating the company's financial situation is typical for a stable company.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Microsoft Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
Question 1 1111111111
Question 2 1111111111
Question 3 1101101001
Question 4 1111111111
Question 5 1100010000
Question 6 0011101000
Question 7 1111111111
Question 8 0101000000
Question 9 1100100000
F-score 7857756445

Microsoft Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000111
Question 4 1111111111
Question 5 0100000000
Question 6 0000010010
Question 7 1111111111
Question 8 0000000000
Question 9 0000000000
F-score 4544454565
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