Microsoft Corporation (MSFT) Extended Graph Analysis
May 4th, 2020 Posted by criseldar Extended Analysis No Comment yetMicrosoft Corporation (MSFT) Extended Graph Analysis
Company Profile
Microsoft Corporation (Nasdaq: MSFT) is a technology American multinational corporation headquartered in Redmond, Washington. According to Wikipedia, it develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and related services.
The company enables digital transformation that empowers users and organizations in achieving more. Microsoft has a variety of products and services including Microsoft Office, Microsoft Word, Microsoft Excel, Onedrive, Microsoft Outlook, Microsoft PowerPoint, Microsoft Teams, Microsoft Windows, Microsoft Azure, Microsoft Visual Studio, Microsoft Onenote, Microsoft Exchange Server, Xbox and Microsoft System Center Configuration Manager.
Microsoft Corporation (MSFT) Extended Graph Analysis
1. MSFT CASH FLOW
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Net cash flow provided by operating activites | 29,080,000,000 | 33,325,000,000 | 39,507,000,000 | 42,884,000,000 | 52,185,000,000 | 54,126,000,000 |
Net cash used for investing activities | -23,001,000,000 | -23,950,000,000 | -46,781,000,000 | 6,061,000,000 | -15,773,000,000 | -16,432,000,000 |
Net cash provided by (used for) financing activities | -9,080,000,000 | -8,393,000,000 | 8,408,000,000 | -33,590,000,000 | -36,887,000,000 | -35,411,000,000 |
Capital expenditure | -5,944,000,000 | -8,343,000,000 | -8,129,000,000 | -11,632,000,000 | -13,925,000,000 | -13,546,000,000 |
Free cash flow | 23,136,000,000 | 24,982,000,000 | 31,378,000,000 | 32,252,000,000 | 38,260,000,000 | 40,580,000,000 |
Working Capital | 74,854,000,000 | 80,303,000,000 | 95,324,000,000 | 111,174,000,000 | 106,132,000,000 | 106,132,000,000 |
Facts:
- Cash provided by operating activities was $54 billion in the trailing twelve months 2020.
- Cash used for investing activities was $-16 billion in 2020 trailing twelve months.
- Net cash provided by (used for) financing activities was $-35 billion in 2020 trailing twelve months.
- Capital expenditure was $-14 billion in 2020 trailing twelve months.
- Free cash flow was $41 billion in 2020 trailing twelve months.
- Working capital was $106 billion in 2020 trailing twelve months.
Explanation
- Cash from operating activities increased year-over-year and had a growth rate of 86 percent in five years.
- Cash used for investing activities were investment in property, plant and equipment; and purchases of investment.
- Net cash provided by (used for) financing activities were debt repayment, common stock repurchase and dividend paid.
- Capital expenditures were investment in property, plant and equipment.
- Free cash flow increased year-over-year and had a growth rate of 75 percent in five years.
- Working capital had a growth rate of 42 percent in five years.
Interpretation
MSFT is efficient in maintaining cash from operations in the last five years and it is increasing year-over-year as the net income increases as well. Moreover, the company is capable of generating a positive cash and working capital in the last five years.
2. MSFT BALANCE SHEET
2015 | 2016 | 2017 | 2018 | 2019 | |
Total cash | 96,526,000,000 | 113,240,000,000 | 132,981,000,000 | 133,768,000,000 | 133,819,000,000 |
Current Assets | 124,712,000,000 | 139,660,000,000 | 159,851,000,000 | 169,662,000,000 | 175,552,000,000 |
Net property, plant and equipment | 14,731,000,000 | 18,356,000,000 | 23,734,000,000 | 36,146,000,000 | 43,856,000,000 |
Total non-current assets | 51,511,000,000 | 54,034,000,000 | 81,235,000,000 | 89,186,000,000 | 111,004,000,000 |
Total assets | 176,223,000,000 | 193,694,000,000 | 241,086,000,000 | 258,848,000,000 | 286,556,000,000 |
Current liabilities | 49,858,000,000 | 59,357,000,000 | 64,527,000,000 | 58,488,000,000 | 69,420,000,000 |
Non-current liabilities | 46,282,000,000 | 62,640,000,000 | 104,165,000,000 | 117,642,000,000 | 114,806,000,000 |
Total liabilities | 96,140,000,000 | 121,697,000,000 | 168,692,000,000 | 176,130,000,000 | 184,226,000,000 |
Retained earnings | 9,096,000,000 | 2,282,000,000 | 2,648,000,000 | 13,682,000,000 | 24,150,000,000 |
Stockholders equity | 80,083,000,000 | 71,997,000,000 | 72,394,000,000 | 82,718,000,000 | 102,330,000,000 |
Total Liabilities and Stockholders Equity | 176,223,000,000 | 193,694,000,000 | 241,018,600,000 | 258,848,000,000 | 286,556,000,000 |
Facts:
- Total cash was $134 billion in 2019.
- Current assets were $176 billion in 2019.
- Net property, plant and equipment was $44 billion in 2019.
- Total non-current assets were $111 billion in 2019.
- Total assets were $287 billion in 2019.
- Current liabilities were $69 billion in 2019.
- Non-current liabilities were $184 billion in 2019.
- Total liabilities were $184 billion in 2019.
- Retained earnings were $24 billion in 2019.
- Stockholders equity was $102 billion in 2019.
Explanation:
- Total cash increased year-over-year and has a growth rate of 39 percent in five years.
- Total cash represents 47 percent of total assets.
- Current assets increased year-over-year and have a growth rate of 61 percent in five years.
- Current assets represent 61 percent of total assets.
- Net property, plant and equipment increased year-over-year and have grown 198 percent in five years.
- Net property, plant and equipment represent 15 percent of the total assets.
- Total non-current assets increased year-over-year and grew 116 percent in five years.
- Non-current assets represent 39 percent of total assets.
- Total assets increased year-over-year and it grew 63 percent in five years.
- Current liabilities represent 38 percent of total liabilities.
- Non-current liabilities represent 62 percent of total liabilities.
- Current liabilities represent 64 percent of total liabilities and equities.
- Retained earnings represent 24 percent of total equities.
- Total liabilities represent 64 percent of total liabilities and stockholders equity.
- Stockholders equity represents 36 percent of total liabilities and stockholders equity.
Interpretation
The balance sheet is stable and the company is liquid; its total cash is more than enough to pay for its current obligations.
3. MSFT INCOME AND MARKET
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Revenue | 93,580,000,000 | 85,320,000,000 | 89,950,000,000 | 110,360,000,000 | 125,843,000,000 | 134,249,000,000 |
EBIT | 28,172,000,000 | 21,292,000,000 | 22,632,000,000 | 35,058,000,000 | 42,959,000,000 | 49,323,000,000 |
Net Income | 12,193,000,000 | 16,798,000,000 | 21,204,000,000 | 16,571,000,000 | 39,240,000,000 | 44,323,000,000 |
EBITDA | 25,245,000,000 | 27,616,000,000 | 34,149,000,000 | 49,468,000,000 | 58,056,000,000 | 64,508,000,000 |
Market Capitalization | 439,679,000,000 | 483,160,000,000 | 659,906,000,000 | 780,362,000,000 | 1,200,255,000,000 | 1,303,800,000,000 |
Intrinsic Value | 401,084,844,920 | 573,333,286,219 | 993,423,476,928 | 2,363,321,837,249 | 3,311,254,516,335 | 4,673,490,334,265 |
Facts:
- Revenue was $134 billion in 2020.
- EBIT was $49 billion in 2020.
- Net income was $44 billion in 2020.
- EBITDA was $65 billion in 2020.
- The market capitalization was $1.304 trillion in the trailing twelve months of 2020.
- Intrinsic value was $4.7 trillion in the trailing twelve months 2020.
Explanation
- Revenue grew 43 percent in five years.
- EBIT grew 75 percent in five years and represented 37 percent of revenue.
- Net income grew 264 percent in five years and it represented 33 percent of revenue.
- EBITDA grew 131 percent in five years and it represented 48 percent of revenue.
- Market capitalization is lesser than the intrinsic value.
- Intrinsic value is higher than the market capitalization.
- The stock price of MSFT is undervalued.
Interpretation
Microsoft Corporation has been profitable in the last five years. The company was able to maintain a net income of one/third of its revenue. Market capitalization was lesser than the intrinsic value of the stock. In other terms the stock price of Microsoft was undervalued.
4. MSFT FINANCIAL RATIOS
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Asset turnover (average) | 0.54 | 0.46 | 0.41 | 0.44 | 0.46 | 0.50 |
Return on assets % | 7.00 | 9.08 | 9.75 | 6.63 | 14.39 | 16.37 |
Return on equity % | 14.36 | 22.09 | 29.37 | 21.37 | 42.41 | 43.83 |
Return on invested capital % | 11.16 | 14.81 | 16.39 | 11.49 | 24.13 | 26.08 |
Debt/Equity | 0.35 | 0.57 | 1.05 | 0.94 | 0.71 | 0.64 |
Facts
- Asset turnover was averaging 0.50 in 2020.
- Return on assets was 16.37 percent in 2020.
- Return on equity was 43.83 percent in 2020.
- Return on invested capital was 26.08 percent in 2020.
- Debt/Equity ratio was 0.64 in 2020.
Explanation:
- Asset turnover ratio means that every dollar invested in assets it generates $0.50 in sales.
- Return on assets indicate that every dollar invested in the asset it generated $0.16 net income.
- Return on equity indicates that every dollar invested in equity it generated 44 cents in profit.
- Return on invested capital indicates that the company generated $0.26 profit for every dollar invested in capital.
- Debt/Equity indicate that for every dollar in equity the company has 64 cents in leverage.
Interpretation
Financial ratios indicate that the company was efficient in producing a good return on the investments made in equity, assets and capital.
5. MSFT KEY EXECUTIVE COMPENSATION
2015 | 2016 | 2017 | 2018 | 2019 | |
Key Executive Compensation | |||||
Salary | 3,065,189 | 3,339,584 | 4,554,804 | 4,723,000 | 5,654,666 |
Bonus | 11,393,000 | 106,949,000 | 0 | 0 | 0 |
Annual Other Income | 0 | 0 | 0 | 0 | 0 |
Restricted Stock Award | 33,866,330 | 29,339,737 | 43,286,384 | 48,925,444 | 76,879,883 |
Securities Options | 0 | 0 | 0 | 0 | 0 |
LTIP Payout | 0 | 0 | 0 | 0 | 0 |
Non-Equity Compensation | 0 | 0 | 18,830,384 | 20,055,199 | 22,993,561 |
Other Compensation | 58,991 | 65,442 | 419,890 | 459,964 | 500,139 |
Total | 48,383,510 | 43,393,763 | 67,091,602 | 74,163,607 | 106,028,249 |
Satya Nadella, CEO and Director | |||||
Salary | 1,200,000 | 1,200,000 | 1,450,000 | 1,500,000 | 2,333,333 |
Bonus | 4,320,000 | 4,464,000 | 0 | 0 | 0 |
Annual Other Income | 0 | 0 | 0 | 0 | 0 |
Restricted Stock Award | 12,761,263 | 12,013,927 | 11,434,557 | 16,807,208 | 29,668,651 |
Securities Options | 0 | 0 | 0 | 0 | 0 |
LTIP Payout | 0 | 0 | 0 | 0 | 0 |
Non-Equity Compensation | 0 | 0 | 7,032,406 | 7,425,000 | 10,796,868 |
Other Compensation | 13,007 | 14,104 | 97,189 | 111,055 | 111,363 |
Total | 18,294,270 | 17,692,031 | 20,014,152 | 25,843,263 | 42,910,215 |
Amy Hood, Executive VP and CFO | |||||
Salary | 675,985 | 731,250 | 852,917 | 875,000 | 958,333 |
Bonus | 1,978,000 | 2,304,000 | 0 | 0 | 0 |
Annual Other Income | 0 | 0 | 0 | 0 | 0 |
Restricted Stock Award | 6,090,606 | 7,326,650 | 7,015,071 | 10,232,265 | 15,316,653 |
Securities Options | 0 | 0 | 0 | 0 | 0 |
LTIP Payout | 0 | 0 | 0 | 0 | 0 |
Non-Equity Compensation | 0 | 0 | 3,624,896 | 3,718,750 | 3,855,040 |
Other Compensation | 10,372 | 12,730 | 89,260 | 98,442 | 97,608 |
Total | 8,754,963 | 10,374,630 | 11,582,144 | 14,924,457 | 20,227,634 |
Bradford L. Smith, President and Chief Legal Officer | |||||
Salary | 650,000 | 704,167 | 785,833 | 800,000 | 850,000 |
Bonus | 1,300,000 | 1,972,000 | 0 | 0 | 0 |
Annual Other Income | 0 | 0 | 0 | 0 | 0 |
Restricted Stock Award | 4,833,835 | 5,915,948 | 6,193,370 | 9,033,868 | 13,045,437 |
Securities Options | 0 | 0 | 0 | 0 | 0 |
LTIP Payout | 0 | 0 | 0 | 0 | 0 |
Non-Equity Compensation | 0 | 0 | 3,241,543 | 3,566,700 | 3,366,148 |
Other Compensation | 16,847 | 18,497 | 98,989 | 111,055 | 111,412 |
Total | 6,800,682 | 8,610,612 | 10,319,735 | 13,511,623 | 17,372,997 |
Jean-philippe Courtois, EVP and President Global Sales Marketing and Operations | |||||
Salary | 751,054 | 833,000 | 798,000 | ||
Bonus | 0 | 0 | 0 | ||
Annual Other Income | 0 | 0 | 0 | ||
Restricted Stock Award | 14,735,464 | 7,149,549 | 11,309,474 | ||
Securities Options | 0 | 0 | 0 | ||
LTIP Payout | 0 | 0 | 0 | ||
Non-Equity Compensation | 2,762,884 | 3,092,513 | 2,889,049 | ||
Other Compensation | 45,214 | 51,187 | 88,231 | ||
Total | 18,294,616 | 11,126,249 | 15,084,754 | ||
Margaret L. Johnson, EVP, Business Development | |||||
Salary | 539,204 | 704,167 | 715,000 | 715,000 | 715,000 |
Bonus | 3,795,000 | 1,909,000 | 0 | 0 | 0 |
Annual Other Income | 0 | 0 | 0 | 0 | 0 |
Restricted Stock Award | 10,180,626 | 4,083,212 | 3,907,922 | 5,702,554 | 7,539,668 |
Securities Options | 0 | 0 | 0 | 0 | 0 |
LTIP Payout | 0 | 0 | 0 | 0 | 0 |
Non-Equity Compensation | 0 | 0 | 2,168,795 | 2,252,236 | 2,086,456 |
Other Compensation | 18,765 | 20,111 | 89,238 | 88,225 | 91,525 |
Total | 14,533,595 | 6,716,490 | 6,880,955 | 8,758,015 | 10,432,649 |
Facts:
- The total key executive compensation in 2015 was $48,383,510.
- Total key executive compensation in 2016 was $43,393,763.
- Total key executive compensation in 2017 was $67,091,602.
- Key executive compensation in 2018 was $74,163,607.
- The total key executive compensation in 2019 was $106,028,249.
Explanation:
- Total key compensation represents 0.24 percent of the net income in 2019.
- Total compensation of Satya Nadella, CEO and Director represents 40 percent of the total key executive compensation in 2019.
- Total compensation of Amy Hood, Executive VP and CFO represents19 percent of the total key executive compensation in 2019.
- Total compensation of Bradford L. Smith, President and Chief Legal Officer representing 16 percent of the total compensation in 2019.
- Total compensation of Jean-philippe Courtois, EVP and President Global Sales Marketing and Operations represent 14 percent of the total compensation in 2019.
- Total compensation of Margaret L. Johnson, EVP, Business Development represents 10 percent of the total compensation in 2019.
Interpretation
The total key executive compensation increased year-over-year at a different level. Compensation includes salary, bonus, restricted stock award and non-equity compensation and some other income.
6. MSFT LOBBYING AND CONTRIBUTIONS
PERIOD | USD |
1998 | 3,920,000 |
1999 | 4,860,000 |
2000 | 6,520,000 |
2001 | 6,640,000 |
2002 | 6,500,000 |
2003 | 8,740,000 |
2004 | 9,460,000 |
2005 | 8,700,000 |
2006 | 8,880,000 |
2007 | 9,000,000 |
2008 | 8,900,000 |
2010 | 6,910,000 |
2011 | 7,340,000 |
2012 | 8,090,000 |
2013 | 10,490,000 |
2014 | 8,330,000 |
2015 | 8,490,000 |
2016 | 8,710,000 |
2017 | 8,660,000 |
2018 | 9,590,000 |
2019 | 10,260,000 |
Facts:
Microsoft Corp is incurring lobbying and contributions to politicians since 1998 to the current period.
Explanation:
A note from OpenSecret.org
Campaign finance totals for the current election cycle were released by the FEC on March 23, 2020 and by the IRS on April 03, 2019, lobbying data was released by the Senate Office of Public Records on March 19, 2019, outside spending data was released by the FEC on April 24, 2020, and personal finances data was released by the House, Senate, and US Office of Government Ethics starting in June 2011.
7. MSFT FINANCIAL STRENGTH
DATA
USD | |
Working capital | 106,132,000,000 |
Total assets | 286,556,000,000 |
Sales | 134,249,000,000 |
EBIT | 49,323,000,000 |
Market value of equity | 1,199,550,000,000 |
Book value of total liabilities | 184,226,000,000 |
Retained earnings | 24,150,000,000 |
CALCULATION
Ratio | Score | Result | |
A – Working Capital / Total Assets | 0.37 | 1.2 | 0.44 |
B – Retained Earnings / Total Assets | 0.08 | 1.4 | 0.12 |
C – EBIT / Total Assets | 0.17 | 3.3 | 0.57 |
D – Market Value of Equity / Book Value of Total Liabilities | 6.51 | 0.6 | 3.91 |
E – Sales / Total Assets | 0.47 | 1 | 0.47 |
Z-Score | 5.51 |
Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Explanation:
Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.
Interpretation
The calculated Z-Score of Microsoft Corp was 5.51. Dr. Altman’s grading scale of 3.0 and above indicates that the company will not declare bankruptcy in near future. In other terms, the company is not close to insolvency. The main factors of this statistical measurement are profitability, liquidity, leverage and efficiency. MSFT has a strong financial health and is very far from insolvency.
OVERVIEW
Microsoft Corp is financially stable and net margin was 33 percent of revenue. The balance sheet is liquid and its current is more than enough to settle current obligations in due period.The management was efficient in maintaining a positive cash from operations and free cash flow in the five years. The company has been profitable in the last five years. Market capitalization was undervalued.
CITATION
https://www.morningstar.com/stocks/xnas/msft/quote
https://www.opensecrets.org/orgs/summary?id=D000000115
Researched and written by Criselda