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Microsoft Corporation (NAS:MSFT)
Piotroski F-Score
6 (As of Today)

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Microsoft Corporation has an F-score of 6 indicating the company's financial situation is typical for a stable company.

MSFT' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 6

4
8

During the past 13 years, the highest Piotroski F-Score of Microsoft Corporation was 8. The lowest was 4. And the median was 5.


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 (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was 6558 + 5244 + 4965 + 6055 = $22,822 Mil.
Cash Flow from Operations was 4413 + 8205 + 5903 + 9666 = $28,187 Mil.
Revenue was 24519 + 18529 + 19896 + 20489 = $83,433 Mil.
Gross Profit was 16235 + 13415 + 14294 + 15702 = $59,646 Mil.
Total Assets at the begining of this year (Dec12) was $128,683 Mil.
Total Assets was $153,543 Mil.
Long-Term Debt was $20,676 Mil.
Total Current Assets was $106,870 Mil.
Total Current Liabilities was $33,742 Mil.
Net Income was 6377 + 4466 + -492 + 5108 = $15,459 Mil.

Revenue was 21456 + 16008 + 18059 + 17407 = $72,930 Mil.
Gross Profit was 15764 + 11840 + 13896 + 13455 = $54,955 Mil.
Total Assets at the begining of last year (Dec11) was $112,243 Mil.
Total Assets was $128,683 Mil.
Long-Term Debt was $11,947 Mil.
Total Current Assets was $89,574 Mil.
Total Current Liabilities was $31,910 Mil.

Profitability

Q1. 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 Corporation's current net income was 22,822. ==> Positive ==> Score 1.

Q2. 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 Corporation's current cash flow from operations was 28,187. ==> Positive ==> Score 1.

Q3. 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/Total Assets at the beginning of this year (Dec12)
=22822/128683
=0.17735054

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=15459/112243
=0.13772797

Microsoft Corporation's return on assets of this year was 0.17735054. Microsoft Corporation's return on assets of last year was 0.13772797. ==> This year is higher. ==> Score 1.

Q4. 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 Corporation's current net income was 22,822. Microsoft Corporation's current cash flow from operations was 28,187. ==> 28,187 > 22,822 ==> CFROA > ROA ==> Score 1.

Funding

Q5. Change in Gearing or Leverage

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

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

Gearing (This Year)=Long-Term Debt/Total Assets
=20676/153543
=0.13465935

Gearing (Last Year)=Long-Term Debt/Total Assets
=11947/128683
=0.09284055

Microsoft Corporation's gearing of this year was 0.13465935. Microsoft Corporation's gearing of last year was 0.09284055. ==> Last year is lower ==> Score 0.

Q6. 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)=Total Current Assets/Total Current Liabilities
=106870/33742
=3.16726928

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=89574/31910
=2.80708242

Microsoft Corporation's current ratio of this year was 3.16726928. Microsoft Corporation's current ratio of last year was 2.80708242. ==> This year's current ratio is higher. ==> Score 1.

Q7. Change in Shares in Issue

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

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

Microsoft Corporation's number of shares in issue this year was 8395. Microsoft Corporation's number of shares in issue last year was 8444. ==> There is the same number of shares in issue this year, or fewer. ==> Score 1.

Efficiency

Q8. 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)=Gross Profit/Revenue
=59646/83433
=0.71489698

Gross Margin (Last Year)=Gross Profit/Revenue
=54955/72930
=0.75353078

Microsoft Corporation's gross margin of this year was 0.71489698. Microsoft Corporation's gross margin of last year was 0.75353078. ==> Last year's gross margin is higher ==> Score 0.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales 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/Total Assets at the beginning of this year (Dec12)
=83433/128683
=0.6483607

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=72930/112243
=0.64975099

Microsoft Corporation's asset turnover of this year was 0.6483607. Microsoft Corporation's asset turnover of last year was 0.64975099. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+0+1+1+0+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Microsoft Corporation has an F-score of 6 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 Corporation Annual Data

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
Q1 1111111111
Q2 1111111111
Q3 0111101101
Q4 1111111111
Q5 0000000010
Q6 1000011101
Q7 0011111111
Q8 1100101000
Q9 0011100100
F-score 5566757756

Microsoft Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Q1 1111111111
Q2 1111111111
Q3 1100000111
Q4 1111111111
Q5 0011111000
Q6 1110000111
Q7 1111011111
Q8 0000000000
Q9 0000000000
F-score 6665455666
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