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 $441.94, Microsoft Corp has witnessed a daily loss of 0.37%, marked against a three-month change of 10.64%. A thorough analysis, underlined by the GF Score, suggests that Microsoft Corp is well-positioned for substantial growth in the near future.
Understanding 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: 7/10
- Momentum rank: 7/10
Each one of these components is ranked and the ranks also have a 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. GuruFocus assigned Microsoft Corp the GF Score of 98 out of 100, which signals the highest outperformance potential.
Understanding Microsoft Corp's Business
Microsoft Corp, with a market capitalization of $3,285.77 billion, is a global leader in software development and licensing for both consumer and enterprise markets. Known for its Windows operating systems and Office productivity suite, Microsoft is organized into three broad segments: productivity and business processes, intelligence cloud, and more personal computing. The company reported sales of $254.19 billion and an operating margin of 44.49%, reflecting its strong market position and operational efficiency.
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 37.8, 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 10.2, Microsoft Corp exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.24, 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 by 30.78% over the past five years, as shown by the following data: 2020: 37.03; 2021: 41.60; 2022: 42.06; 2023: 41.77; 2024: 44.64.
Furthermore, Microsoft's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2020: 67.78; 2021: 68.93; 2022: 68.40; 2023: 68.92; 2024: 69.76. This trend underscores the company's growing proficiency in transforming revenue into profit. Microsoft Corp's strong Predictability Rank of 5.0 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 14.1%, which outperforms better than 61.82% of 2,491 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. Specifically, the three-year growth rate stands at 16.4, and the rate over the past five years is 18.1. This trend accentuates the company's continued capability to drive growth.
Conclusion: Microsoft's Financial Strength and Growth Potential
Microsoft Corp's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's unparalleled position for potential outperformance. The company's strategic initiatives and robust financial health make it a compelling choice for value investors seeking long-term growth. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
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.
