Why Microsoft (MSFT) Is Up Today

NEW YORK (TheStreet) -- Microsoft (MSFT) rose 0.7% to $36.37 on Tuesday on news that it will acquire cloud service provider Parature.

The Redmond, Wash.-based company didn't disclose financial terms of the deal. Parature produces cloud-based software to help companies create self-service portals for their customers. The software includes Web- and mobile-access knowledge bases, live chat, and social monitoring and response features.

Microsoft will use Parature to help improve its Microsoft Dynamics CRM product. The acquisition may help Microsoft Dynamics compete with similar services offered by competitors such as Salesforce.com (CRM).

TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about its 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these 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 came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 15.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 2.65, which clearly demonstrates the ability to cover short-term cash 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 Software industry and the overall market, MICROSOFT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.54% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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