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Microsoft Corp (NAS:MSFT)
Piotroski F-Score
4 (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 4 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: 4

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 own currency.

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Net Income was -3195 + 4620 + 4998 + 3756 = $10,179 Mil.
Cash Flow from Operations was 6261 + 8594 + 5598 + 10367 = $30,820 Mil.
Revenue was 22180 + 20379 + 23796 + 20531 = $86,886 Mil.
Gross Profit was 14712 + 13172 + 13924 + 12809 = $54,617 Mil.
Average Total Assets from the begining of this year (Mar15)
to the end of this year (Mar16) was
(176683 + 176223 + 172896 + 180098 + 181869) / 5 = $177553.8 Mil.
Total Assets at the begining of this year (Mar15) was $176,683 Mil.
Long-Term Debt was $40,896 Mil.
Total Current Assets was $128,421 Mil.
Total Current Liabilities was $44,354 Mil.
Net Income was 4612 + 4540 + 5863 + 4985 = $20,000 Mil.

Revenue was 23382 + 23201 + 26470 + 21729 = $94,782 Mil.
Gross Profit was 15749 + 14928 + 16334 + 14568 = $61,579 Mil.
Average Total Assets from the begining of last year (Mar14)
to the end of last year (Mar15) was
(156119 + 172384 + 169656 + 174848 + 176683) / 5 = $169938 Mil.
Total Assets at the begining of last year (Mar14) was $156,119 Mil.
Long-Term Debt was $27,644 Mil.
Total Current Assets was $118,398 Mil.
Total Current Liabilities was $40,748 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 10,179. ==> 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 30,820. ==> 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 (Mar15)
=10179/176683
=0.05761165

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Mar14)
=20000/156119
=0.12810741

Microsoft Corp's return on assets of this year was 0.05761165. Microsoft Corp's return on assets of last year was 0.12810741. ==> Last year is higher ==> Score 0.

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 10,179. Microsoft Corp's current cash flow from operations (TTM) was 30,820. ==> 30,820 > 10,179 ==> 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: Mar16)=Long-Term Debt/Average Total Assets from Mar15 to Mar16
=40896/177553.8
=0.23033019

Gearing (Last Year: Mar15)=Long-Term Debt/Average Total Assets from Mar14 to Mar15
=27644/169938
=0.16267109

Microsoft Corp's gearing of this year was 0.23033019. Microsoft Corp's gearing of last year was 0.16267109. ==> 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: Mar16)=Total Current Assets/Total Current Liabilities
=128421/44354
=2.89536457

Current Ratio (Last Year: Mar15)=Total Current Assets/Total Current Liabilities
=118398/40748
=2.905615

Microsoft Corp's current ratio of this year was 2.89536457. Microsoft Corp's current ratio of last year was 2.905615. ==> 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 7985. Microsoft Corp's number of shares in issue last year was 8237. ==> 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
=54617/86886
=0.6286053

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=61579/94782
=0.64969087

Microsoft Corp's gross margin of this year was 0.6286053. Microsoft Corp's gross margin of last year was 0.64969087. ==> 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 (Mar15)
=86886/176683
=0.49176208

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar14)
=94782/156119
=0.6071138

Microsoft Corp's asset turnover of this year was 0.49176208. Microsoft Corp's asset turnover of last year was 0.6071138. ==> 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+0+1+0+0+1+0+0
=4

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

Microsoft Corp has an F-score of 4 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 own currency.

Microsoft Corp Annual Data

Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15
Question 1 1111111111
Question 2 1111111111
Question 3 1110110100
Question 4 1111111111
Question 5 1110001000
Question 6 0001110100
Question 7 1111111111
Question 8 0010100000
Question 9 1110010000
F-score 7785775644

Microsoft Corp Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
Question 1 1111111111
Question 2 1111111111
Question 3 1100000000
Question 4 1111111111
Question 5 0000100000
Question 6 1100000010
Question 7 1111111111
Question 8 0000000000
Question 9 0000000000
F-score 6644544454
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