Why Microsoft (MSFT) Hit a One-Year High Today

NEW YORK (TheStreet) -- Microsoft  (MSFT) hit a one-year high of $39.90 as of 11 a.m. on Tuesday amid reports that CEO Satya Nadella plans to introduce its Microsoft Office software suite for iPad on Thursday, March 27.

Reuters reports through a source close to the situation that Nadella would use his first major press appearance, an event in San Francisco at which he will address media and industry executives, to announce a version of Microsoft's most profitable product compatible with Apple's  (AAPL) iPad tablets.

Investors have pressured Microsoft to adapt Office for Apple and Google  (GOOG) mobile devices as PC sales decrease, but Microsoft had hesitated to do so because it did not want to damage its Windows PC operating software. Analysts estimate that Microsoft leaves $2.5 billion in revenue on the table by keeping Office off of the iPad, which has sold nearly 200 million units.

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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 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:

  • MSFT's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although MSFT's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.96, which clearly demonstrates the ability to cover short-term cash 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. 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 35.73% 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.
  • You can view the full analysis from the report here: MSFT Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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