Microsoft Profitability Analysis

MSFT Stock  USD 431.20  0.22  0.05%   
Based on Microsoft's profitability indicators, Microsoft's profitability may be sliding down. It has an above-average chance of reporting lower numbers next quarter. Profitability indicators assess Microsoft's ability to earn profits and add value for shareholders.
 
Net Income  
First Reported
1989-09-30
Previous Quarter
22 B
Current Value
24.7 B
Quarterly Volatility
5.9 B
 
Oil Shock
 
Dot-com Bubble
 
Housing Crash
 
Credit Downgrade
 
Yuan Drop
 
Covid
At this time, Microsoft's EV To Sales is comparatively stable compared to the past year. Sales General And Administrative To Revenue is likely to gain to 0.06 in 2024, whereas Price To Sales Ratio is likely to drop 8.91 in 2024. At this time, Microsoft's Change To Netincome is comparatively stable compared to the past year. Net Income Per Share is likely to gain to 12.45 in 2024, whereas Interest Income is likely to drop slightly above 1.8 B in 2024.
Current ValueLast YearChange From Last Year 10 Year Trend
Gross Profit Margin0.870.6976
Fairly Up
Very volatile
Net Profit Margin0.220.3596
Way Down
Slightly volatile
Operating Profit Margin0.290.4464
Way Down
Slightly volatile
Pretax Profit Margin0.420.4397
Sufficiently Down
Slightly volatile
Return On Assets0.20.1721
Fairly Up
Pretty Stable
Return On Equity0.240.3283
Way Down
Slightly volatile
For Microsoft profitability analysis, we use financial ratios and fundamental drivers that measure the ability of Microsoft to generate income relative to revenue, assets, operating costs, and current equity. These fundamental indicators attest to how well Microsoft utilizes its assets to generate profit and value for its shareholders. The profitability module also shows relationships between Microsoft's most relevant fundamental drivers. It provides multiple suggestions of what could affect the performance of Microsoft over time as well as its relative position and ranking within its peers.
  

Microsoft's Revenue Breakdown by Earning Segment

Check out Correlation Analysis.
For more information on how to buy Microsoft Stock please use our How to Invest in Microsoft guide.
Is Systems Software space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Microsoft. If investors know Microsoft will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Microsoft listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
0.104
Dividend Share
3.08
Earnings Share
12.11
Revenue Per Share
34.202
Quarterly Revenue Growth
0.16
The market value of Microsoft is measured differently than its book value, which is the value of Microsoft that is recorded on the company's balance sheet. Investors also form their own opinion of Microsoft's value that differs from its market value or its book value, called intrinsic value, which is Microsoft's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Microsoft's market value can be influenced by many factors that don't directly affect Microsoft's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Microsoft's value and its price as these two are different measures arrived at by different means. Investors typically determine if Microsoft is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Microsoft's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

Microsoft Return On Asset vs. Return On Equity Fundamental Analysis

Comparative valuation techniques use various fundamental indicators to help in determining Microsoft's current stock value. Our valuation model uses many indicators to compare Microsoft value to that of its competitors to determine the firm's financial worth.
Microsoft is regarded third in return on equity category among its peers. It is regarded second in return on asset category among its peers reporting about  0.41  of Return On Asset per Return On Equity. The ratio of Return On Equity to Return On Asset for Microsoft is roughly  2.44 . At this time, Microsoft's Return On Equity is comparatively stable compared to the past year. Comparative valuation analysis is a catch-all technique that is used if you cannot value Microsoft by discounting back its dividends or cash flows. It compares the stock's price multiples to nearest competition to determine if the stock is relatively undervalued or overvalued.

Microsoft Return On Asset vs. Return On Equity

Return on Equity or ROE tells company stockholders how effectually their money is being utilized or reinvested. It is a useful ratio when analyzing company profitability or the management effectiveness given the capital invested by the shareholders. ROE shows how efficiently a company utilizes investments to generate income.

Microsoft

Return On Equity

 = 

Net Income

Total Equity

 = 
0.36
For most industries, Return on Equity between 10% and 30% are considered desirable to provide dividends to owners and have funds for the future growth of the company. Investors should be very careful using ROE as the only efficiency indicator because ROE can be high if a company is heavily leveraged.
Return on Asset or ROA shows how effective is the management of the company in generating income from utilizing all of the assets at their disposal. It is a useful ratio to evaluate the performance of different departments of a company as well as to understand management performance over time.

Microsoft

Return On Asset

 = 

Net Income

Total Assets

 = 
0.15
Return on Asset measures overall efficiency of a company in generating profits from its total assets. It is expressed as the percentage of profits earned per dollar of Asset. A low ROA typically means that a company is asset-intensive and therefore will needs more money to continue generating revenue in the future.

Microsoft Return On Asset Comparison

Microsoft is currently under evaluation in return on asset category among its peers.

Microsoft Profitability Projections

The most important aspect of a successful company is its ability to generate a profit. For investors in Microsoft, profitability is also one of the essential criteria for including it into their portfolios because, without profit, Microsoft will eventually generate negative long term returns. The profitability progress is the general direction of Microsoft's change in net profit over the period of time. It can combine multiple indicators of Microsoft, where stable trends show no significant progress. An accelerating trend is seen as positive, while a decreasing one is unfavorable. A rising trend means that profits are rising, and operational efficiency may be rising as well. A decreasing trend is a sign of poor performance and may indicate upcoming losses.
Last ReportedProjected for Next Year
Accumulated Other Comprehensive Income-5.6 B-5.3 B
Operating Income109.4 B114.9 B
Income Before Tax107.8 B113.2 B
Total Other Income Expense Net-1.6 B-1.6 B
Net Income88.1 B92.5 B
Income Tax Expense19.7 B20.6 B
Net Income Applicable To Common Shares83.2 B87.4 B
Net Income From Continuing Ops88.1 B92.5 B
Non Operating Income Net Other382.9 M605.6 M
Net Interest Income222 M233.1 M
Interest Income3.2 B1.8 B
Change To Netincome1.3 BB
Net Income Per Share 11.86  12.45 
Income Quality 1.35  1.18 
Net Income Per E B T 0.82  0.58 

Microsoft Profitability Driver Comparison

Profitability drivers are factors that can directly affect your investment outlook on Microsoft. Investors often realize that things won't turn out the way they predict. There are maybe way too many unforeseen events and contingencies during the holding period of Microsoft position where the market behavior may be hard to predict, tax policy changes, gold or oil price hikes, calamities change, and many others. The question is, are you prepared for these unexpected events? Although some of these situations are obviously beyond your control, you can still follow the important profit indicators to know where you should focus on when things like this occur. Below are some of the Microsoft's important profitability drivers and their relationship over time.

Microsoft Profitability Trends

Microsoft profitability trend refers to the progression of profit or loss within a business. An upward trend means that Microsoft's profit has generally increased over time, and a downward profitability trend means profits are declining. Recognizing problems early in profitability trends allows investors to address revenue and cost issues in advance. Investors and analysts usually monitor three types of profitability trends: gross, operating, and net. Gross profit is the difference between revenue and costs of goods sold. Operating profit is Microsoft's gross profit minus its overhead. After you account for other unusual revenue, expenses, and costs, you get net profit. Gross profit trends are often a good indicator of future profitability. If you have high gross profit margins, you have a better chance to cover overhead and make money.

Microsoft Profitability Drivers Correlations

One of the toughest challenges investors face today is learning how to quickly synthesize and read into endless financial statements and information provided by the company, SEC reporting, and various external parties. Understanding the correlation between Microsoft different financial indicators related to revenue and profit generation helps investors identify and prioritize their investing strategies towards Microsoft in a much-optimized way. Analyzing correlations between profit drivers that are directly associated with dollar figures is the most effective way to break down Microsoft's future profitability.

Use Microsoft in pair-trading

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Microsoft position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Microsoft will appreciate offsetting losses from the drop in the long position's value.

Microsoft Pair Trading

Microsoft Pair Trading Analysis

The ability to find closely correlated positions to Microsoft could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Microsoft when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Microsoft - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Microsoft to buy it.
The correlation of Microsoft is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Microsoft moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Microsoft moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Microsoft can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching

Use Investing Themes to Complement your Microsoft position

In addition to having Microsoft in your portfolios, you can quickly add positions using our predefined set of ideas and optimize them against your very unique investing style. A single investing idea is a collection of funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of investment themes. After you determine your investment opportunity, you can then find an optimal portfolio that will maximize potential returns on the chosen idea or minimize its exposure to market volatility.

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Technology
Technology Theme
Companies that are involved in development or distribution of technologically based goods and services such as software, IT or electronics. The Technology theme has 30 constituents at this time.
You can either use a buy-and-hold strategy to lock in the entire theme or actively trade it to take advantage of the short-term price volatility of individual constituents. Macroaxis can help you discover thousands of investment opportunities in different asset classes. In addition, you can partner with us for reliable portfolio optimization as you plan to utilize Technology Theme or any other thematic opportunities.
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Additional Tools for Microsoft Stock Analysis

When running Microsoft's price analysis, check to measure Microsoft's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Microsoft is operating at the current time. Most of Microsoft's value examination focuses on studying past and present price action to predict the probability of Microsoft's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Microsoft's price. Additionally, you may evaluate how the addition of Microsoft to your portfolios can decrease your overall portfolio volatility.