10 S&P 500 Tech Companies That Are the Most Shareholder-Friendly - TheStreet

Technology companies are known to reinvest their cash in their businesses, but as the sector matures, it is due for some changes in company capital allocation strategies -- with the shareholder as the likely winner.

"We see more S&P 500 technology companies buying back more stock and initiating and increasing dividends," S&P Capital IQ said in a report last month.

Buybacks in the sector more than doubled in the past 10 years to $156 billion in 2014 from $76 billion in 2005, according to S&P Capital IQ. Increased buyback activity over the past several years "reflects strong operating cash flows, increased comfort with more aggressive capital allocations and shareholders (including activists) increasingly calling for or demanding expanded actions," the Oct. 19 report said.

The dollar amount of dividends rose fivefold to $54 billion last year from $11 billion in 2005. "In the past decade, we believe the investing public, including shareholders and managements, has become more comfortable with the concept of technology companies -- traditionally thought of as investing for growth -- initiating and increasing dividends," the report said. "We think this growing comfort acknowledges key companies maturing and the importance of dividends for investors, especially given the current low interest rate environment and uncertain backdrop for investment returns."

The analysts specifically called out Alphabet (GOOGL) - Get Report (Google's new name for its holding company) as likely to announce a "substantial" capital allocation program within the next year. The company had $68 billion in cash and short-term investments as of June 2015, according to the report.

S&P Capital IQ analysts also predicted that one other major company will introduce a dividend by the end of 2016 -- suggesting it could be eBay (EBAY) - Get ReportFacebook (FB) - Get Report , Akamai Technologies (AKAM) - Get Report , VeriSign (VRSN) - Get Report or Yahoo! (YHOO) .

S&P 500 companies are increasingly deploying cash to shareholders via stock repurchases and dividend payouts, and with more than $1 trillion in cash on their balance sheets as of June, that trend is likely to continue, S&P Capital IQ said. 

Two of the top 10 S&P 500 companies with the most buybacks and dividends combined from 2005 to 2014 were technology companies.

So which tech companies have led the way with the most returned capital to shareholders over the past 10 years? Here's the list, in order of least to most, along with ratings from TheStreet Ratings for additional perspective. And when you're done be sure to check out the health care companies that are the most shareholder friendly.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecast company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on Nov. 23 closing prices.

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V

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10. Visa (V) - Get Report
Industry: Technology/Data Processing & Outsourced Services
Year-to-date return: 22.2%

Total Returned Capital 2005-2014: $34.32 billion
Dividends 2005-2014: $3.96 billion
Buybacks 2005-2014: $30.36 billion

TheStreet Said: TheStreet Ratings team rates VISA INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate VISA INC (V) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 27.0%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • V has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, V has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
  • VISA INC has improved earnings per share by 44.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VISA INC increased its bottom line by earning $2.57 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $2.57).
  • The gross profit margin for VISA INC is rather high; currently it is at 67.57%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.34% significantly outperformed against the industry average.
  • Powered by its strong earnings growth of 44.18% and other important driving factors, this stock has surged by 28.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: V

QCOM data by YCharts

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9. Qualcomm (QCOM) - Get Report
Industry: Technology/Communications Equipment
Year-to-date return: -34.1%

Total Returned Capital 2005-2014: $34.78 billion
Dividends 2005-2014: $13.6 billion
Buybacks 2005-2014: $21.18 billion

TheStreet Said: TheStreet Ratings team rates QUALCOMM INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate QUALCOMM INC (QCOM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.16, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for QUALCOMM INC is rather high; currently it is at 64.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.46% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,684.00 million or 4.01% when compared to the same quarter last year. Despite an increase in cash flow, QUALCOMM INC's average is still marginally south of the industry average growth rate of 4.02%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.63% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 43.9% when compared to the same quarter one year ago, falling from $1,894.00 million to $1,062.00 million.
  • You can view the full analysis from the report here: QCOM
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TXN

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8. Texas Instruments (TXN) - Get Report
Industry: Technology/Semiconductors
Year-to-date return: 7.3%

Total Returned Capital 2005-2014: $35.79 billion
Dividends 2005-2014: $6.45 billion
Buybacks 2005-2014: $29.34 billion

TheStreet Said: TheStreet Ratings team rates TEXAS INSTRUMENTS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate TEXAS INSTRUMENTS INC (TXN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations, solid stock price performance and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TXN has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TEXAS INSTRUMENTS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has slightly increased to $1,409.00 million or 1.87% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -21.80%.
  • TEXAS INSTRUMENTS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEXAS INSTRUMENTS INC increased its bottom line by earning $2.58 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.58).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: TXN
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ORCL

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7. Oracle (ORCL) - Get Report
Industry: Technology/Systems Software
Year-to-date return: -13%

Total Returned Capital 2005-2014: $53.37 billion
Dividends 2005-2014: $8.2 billion
Buybacks 2005-2014: $45.17 billion

TheStreet Said: TheStreet Ratings team rates ORACLE CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate ORACLE CORP (ORCL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ORCL's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.86 is very high and demonstrates very strong liquidity.
  • The gross profit margin for ORACLE CORP is currently very high, coming in at 80.69%. Regardless of ORCL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.67% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Software industry average. The net income has decreased by 20.0% when compared to the same quarter one year ago, dropping from $2,184.00 million to $1,747.00 million.
  • Net operating cash flow has decreased to $5,856.00 million or 12.96% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ORACLE CORP has marginally lower results.
  • You can view the full analysis from the report here: ORCL
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HPQ

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6. HP (formerly Hewlett-Packard) (HPQ) - Get Report
Industry: Technology/Systems Software
Return since the company split in two on Nov. 1: 2.9%

Total Returned Capital 2005-2014: $74.1 billion
Dividends 2005-2014: $9.19 billion
Buybacks 2005-2014: $64.91 billion

TheStreet Said: TheStreet Ratings team rates HP INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate HP INC (HPQ) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that HPQ's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • The revenue fell significantly faster than the industry average of 25.6%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, HP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HPQ has underperformed the S&P 500 Index, declining 16.48% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: HPQ
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CSCO

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5. Cisco Systems (CSCO) - Get Report
Industry: Technology/Communications Equipment
Year-to-date return: -1.4%

Total Returned Capital 2005-2014: $80.76 billion
Dividends 2005-2014: $11.17 billion
Buybacks 2005-2014: $69.58 billion

TheStreet Said: TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate CISCO SYSTEMS INC (CSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and reasonable valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 3.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CISCO SYSTEMS INC has improved earnings per share by 37.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, CISCO SYSTEMS INC increased its bottom line by earning $1.73 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($2.28 versus $1.73).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 33.0% when compared to the same quarter one year prior, rising from $1,828.00 million to $2,431.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Communications Equipment industry and the overall market, CISCO SYSTEMS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • You can view the full analysis from the report here: CSCO
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INTC

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4. Intel (INTC) - Get Report
Industry: Technology/Semiconductors
Year-to-date return: -5%

Total Returned Capital 2005-2014: $95.69 billion
Dividends 2005-2014: $33.97 billion
Buybacks 2005-2014: $61.72 billion

TheStreet Said: TheStreet Ratings team rates INTEL CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate INTEL CORP (INTC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, INTC has a quick ratio of 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, INTEL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Net operating cash flow has remained constant at $5,735.00 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -21.80%.
  • The gross profit margin for INTEL CORP is currently very high, coming in at 78.24%. Regardless of INTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 21.49% trails the industry average.
  • You can view the full analysis from the report here: INTC
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AAPL

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3. Apple (AAPL) - Get Report
Industry: Technology
Year-to-date return: 6.7%

Total Returned Capital 2005-2014: $100.2 billion
Dividends 2005-2014: $26.97 billion
Buybacks 2005-2014: $73.24 billion

TheStreet Said: TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, robust revenue growth, notable return on equity and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • APPLE INC has improved earnings per share by 38.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, APPLE INC increased its bottom line by earning $9.20 versus $6.43 in the prior year. This year, the market expects an improvement in earnings ($9.89 versus $9.20).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Computers & Peripherals industry average. The net income increased by 31.4% when compared to the same quarter one year prior, rising from $8,467.00 million to $11,124.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 25.6%. Since the same quarter one year prior, revenues rose by 22.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 45.95% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.59% is above that of the industry average.
  • You can view the full analysis from the report here: AAPL
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IBM

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2. International Business Machines (IBM) - Get Report
Industry: Technology/IT Consulting & Other Services
Year-to-date return: -13.7%

Total Returned Capital 2005-2014: $151.8 billion
Dividends 2005-2014: $29.27 billion
Buybacks 2005-2014: $122.61 billion

TheStreet Said: TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate INTL BUSINESS MACHINES CORP (IBM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 16288.9% when compared to the same quarter one year prior, rising from $18.00 million to $2,950.00 million.
  • Net operating cash flow has slightly increased to $4,235.00 million or 8.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.27%.
  • Despite the weak revenue results, IBM has outperformed against the industry average of 27.0%. Since the same quarter one year prior, revenues fell by 13.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IBM has underperformed the S&P 500 Index, declining 15.30% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, IBM's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: IBM
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MSFT

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1. Microsoft (MSFT) - Get Report
Industry: Technology/Systems Software
Year-to-date return: 16.7%

Total Returned Capital 2005-2014: $175.87 billion
Dividends 2005-2014: $54.9 billion
Buybacks 2005-2014: $120.96 billion

TheStreet Said: TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, reasonable valuation levels, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 1.8% when compared to the same quarter one year prior, going from $4,540.00 million to $4,620.00 million.
  • The gross profit margin for MICROSOFT CORP is currently very high, coming in at 71.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.67% is above that of the industry average.
  • Net operating cash flow has slightly increased to $8,594.00 million or 2.87% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.89%.
  • You can view the full analysis from the report here: MSFT