Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . 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, reasonable valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- MSFT's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MSFT has a quick ratio of 2.41, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $7,677.00 million or 29.19% when compared to the same quarter last year. In addition, MICROSOFT CORP has also modestly surpassed the industry average cash flow growth rate of 21.50%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
Microsoft Corporation develops, licenses, and supports software products and services; and designs and sells hardware worldwide. The company has a P/E ratio of 15.7, equal to the average computer software & services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Microsoft has a market cap of $263.66 billion and is part of the
industry. Shares are up 20.1% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.
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