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 ( TheStreet) -- Microsoft Corporation (Nasdaq: MSFT) 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 largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins, notable return on equity 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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- MSFT's debt-to-equity ratio is very low at 0.17 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 2.44, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for MICROSOFT CORP is currently very high, coming in at 78.40%. Regardless of MSFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MSFT's net profit margin of 27.89% compares favorably to the industry average.
- MICROSOFT CORP's earnings per share declined by 22.1% in the most recent quarter compared to the same quarter a year ago. 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 ($2.90 versus $2.00).
- MSFT, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
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