TSC Ratings' Updates: Microsoft

Net operating cash flow has declined marginally to $863.00 million or 8.09% when compared with the same quarter last year, but GD is still exceeded its industry average cash flow growth rate of -36.65%. Shares have plunged 42.71% compared on the year. Naturally, the overall market trend is bound to be a significant factor, and the stock's sharp decline last year could be considered a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've downgraded Microsoft(MSFT Quote) from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the company's cash flow from its operations has been weak overall.

Microsoft's revenue growth of 9.4% over the same quarter a year ago has slightly outpaced the industry average of 8.8% and appears to have boosted EPS. The 0.06 debt-to-equity ratio is very low and currently below the industry average, implying very successful management of debt levels. The company also maintains an adequate quick ratio of 1.24, which illustrates the ability to avoid short-term cash problems.

Net operating cash flow has decreased to $3,370.00 million, or 42.66% when compared with the same quarter last year. Although shares are off by a sharp 39.54% compared with one year ago, its decline was actually not as bad as the broader market plunge during that same time frame. One factor that may have helped cushion the fall somewhat was the EPS improvement. Naturally, the overall market trend is bound to be a significant factor, and the stock's sharp decline last year could be considered a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.