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, attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- MSFT's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.59, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MICROSOFT CORP is currently very high, coming in at 78.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.72% is above that of the industry average.
- MICROSOFT CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, MICROSOFT CORP reported lower earnings of $2.00 versus $2.69 in the prior year. This year, the market expects an improvement in earnings ($2.84 versus $2.00).
Microsoft Corporation develops, licenses, and supports software products and services; and designs and sells hardware worldwide. Microsoft has a market cap of $235.88 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 15.5, below the S&P 500 P/E ratio of 17.7. Shares are up 5.4% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.
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