An Insider Look at Microsoft Corporation (NasdaqGS:MSFT) and Apple Inc. (NasdaqGS:AAPL)'s Quant Signals - Holland Review

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The Value Composite score of Microsoft Corporation (NasdaqGS:MSFT) is 62.  A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company.  The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings.  Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield.  The Value Composite Two of Microsoft Corporation (NasdaqGS:MSFT) is 54.

Microsoft Corporation (NasdaqGS:MSFT) presently has a current ratio of 3.12. The current ratio, also known as the working capital ratio, is a liquidity ratio that displays the proportion of current assets of a business relative to the current liabilities. The ratio is simply calculated by dividing current liabilities by current assets. The ratio may be used to provide an idea of the ability of a certain company to pay back its liabilities with assets. Typically, the higher the current ratio the better, as the company may be more capable of paying back its obligations.

Investors may be interested in viewing the Gross Margin score on shares of Microsoft Corporation (NasdaqGS:MSFT). The name currently has a score of 33.00000. This score is derived from the Gross Margin (Marx) stability and growth over the previous eight years. The Gross Margin score lands on a scale from 1 to 100 where a score of 1 would be considered positive, and a score of 100 would be seen as negative.

Microsoft Corporation (NasdaqGS:MSFT)’s Leverage Ratio was recently noted as 0.306303. This ratio is calculated by dividing total debt by total assets plus total assets previous year, divided by two. The leverage of a company is relative to the amount of debt on the balance sheet. This ratio is often viewed as one measure of the financial health of a firm.

At the time of writing, Microsoft Corporation (NasdaqGS:MSFT) has a Piotroski F-Score of 8. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.

Microsoft Corporation (NasdaqGS:MSFT) has a current ERP5 Rank of 6660. The ERP5 Rank may assist investors with spotting companies that are undervalued. This ranking uses four ratios. These ratios are Earnings Yield, ROIC, Price to Book, and 5 year average ROIC. When looking at the ERP5 ranking, it is generally considered the lower the value, the better.

Microsoft Corporation (NasdaqGS:MSFT) has a Price to Book ratio of 9.012319. This ratio is calculated by dividing the current share price by the book value per share. Investors may use Price to Book to display how the market portrays the value of a stock. Checking in on some other ratios, the company has a Price to Cash Flow ratio of 18.000410, and a current Price to Earnings ratio of 24.754388. The P/E ratio is one of the most common ratios used for figuring out whether a company is overvalued or undervalued.

Microsoft Corporation (NasdaqGS:MSFT) has a current MF Rank of 4686. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at an attractive price. The formula uses ROIC and earnings yield ratios to find quality, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.

Valuation
The Return on Invested Capital (aka ROIC) for Microsoft Corporation (NasdaqGS:MSFT) is 0.380306. The Return on Invested Capital is a ratio that determines whether a company is profitable or not. It tells investors how well a company is turning their capital into profits. The ROIC is calculated by dividing the net operating profit (or EBIT) by the employed capital. The employed capital is calculated by subrating current liabilities from total assets. Similarly, the Return on Invested Capital Quality ratio is a tool in evaluating the quality of a company’s ROIC over the course of five years. The ROIC Quality of Microsoft Corporation (NasdaqGS:MSFT) is 9.308984. This is calculated by dividing the five year average ROIC by the Standard Deviation of the 5 year ROIC. The ROIC 5 year average is calculated using the five year average EBIT, five year average (net working capital and net fixed assets). The ROIC 5 year average of Microsoft Corporation (NasdaqGS:MSFT) is 0.333291.

Honing in on some valuation rankings, Apple Inc. (NasdaqGS:AAPL) has a Value Composite score of 46. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 34.

The Price Index is a ratio that indicates the return of a share price over a past period. The price index of Apple Inc. (NasdaqGS:AAPL) for last month was 1.09810. This is calculated by taking the current share price and dividing by the share price one month ago. If the ratio is greater than 1, then that means there has been an increase in price over the month. If the ratio is less than 1, then we can determine that there has been a decrease in price. Similarly, investors look up the share price over 12 month periods. The Price Index 12m for Apple Inc. (NasdaqGS:AAPL) is 1.00867.
Price Range 52 Weeks

Some of the best financial predictions are formed by using a variety of financial tools. The Price Range 52 Weeks is one of the tools that investors use to determine the lowest and highest price at which a stock has traded in the previous 52 weeks. The Price Range of Apple Inc. (NasdaqGS:AAPL) over the past 52 weeks is 0.734000. The 52-week range can be found in the stock’s quote summary.

The Current Ratio of Apple Inc. (NasdaqGS:AAPL) is 1.30. The Current Ratio is used by investors to determine whether a company can pay short term and long term debts. The current ratio looks at all the liquid and non-liquid assets compared to the company’s total current liabilities. A high current ratio indicates that the company might have trouble managing their working capital. A low current ratio (when the current liabilities are higher than the current assets) indicates that the company may have trouble paying their short term obligations.

The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength. The score helps determine if a company’s stock is valuable or not. The Piotroski F-Score of Apple Inc. (NasdaqGS:AAPL) is 6. A score of nine indicates a high value stock, while a score of one indicates a low value stock. The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings. It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue. The score is also determined by change in gross margin and change in asset turnover.

C Score (Montier)

The C-Score is a system developed by James Montier that helps determine whether a company is involved in falsifying their financial statements. The C-Score is calculated by a variety of items, including a growing difference in net income verse cash flow, increasing days outstanding, growing days sales of inventory, increasing assets to sales, declines in depreciation, and high total asset growth. The C-Score of Apple Inc. (NasdaqGS:AAPL) is 2.00000. The score ranges on a scale of -1 to 6. If the score is -1, then there is not enough information to determine the C-Score. If the number is at zero (0) then there is no evidence of fraudulent book cooking, whereas a number of 6 indicates a high likelihood of fraudulent activity. The C-Score assists investors in assessing the likelihood of a company cheating in the books.

The MF Rank (aka the Magic Formula) is a formula that pinpoints a valuable company trading at a good price. The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital. The MF Rank of Apple Inc. (NasdaqGS:AAPL) is 3331. A company with a low rank is considered a good company to invest in. The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”.

Volatility
Stock volatility is a percentage that indicates whether a stock is a desirable purchase. Investors look at the Volatility 12m to determine if a company has a low volatility percentage or not over the course of a year. The Volatility 12m of Apple Inc. (NasdaqGS:AAPL) is 31.077000. This is calculated by taking weekly log normal returns and standard deviation of the share price over one year annualized. The lower the number, a company is thought to have low volatility. The Volatility 3m is a similar percentage determined by the daily log normal returns and standard deviation of the share price over 3 months. The Volatility 3m of Apple Inc. (NasdaqGS:AAPL) is 42.842500. The Volatility 6m is the same, except measured over the course of six months. The Volatility 6m is 37.178900.

There are many different methods to determine whether a company is profitable or not. One of the most commonly used ratios is the “Return on Assets” (aka ROA). This score indicates how profitable a company is relative to its total assets. The Return on Assets for Apple Inc. (NasdaqGS:AAPL) is 0.146096. This number is calculated by dividing net income after tax by the company’s total assets. A company that manages their assets well will have a higher rate of return, while a firm that manages their assets poorly will have a lower rate of return.

Free Cash Flow Growth (FCF Growth) is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. The FCF Growth of Apple Inc. (NasdaqGS:AAPL) is 0.310484. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The Free Cash Flow Score (FCF Score) is a helpful tool in calculating the free cash flow growth with free cash flow stability – this gives investors the overall quality of the free cash flow. The FCF Score of Apple Inc. (NasdaqGS:AAPL) is 0.880687. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

SMA 50/200:

Ever wonder how investors predict positive share price momentum? The Cross SMA 50/200, also known as the “Golden Cross” is the fifty day moving average divided by the two hundred day moving average. The SMA 50/200 for Apple Inc. (NasdaqGS:AAPL) is currently 0.82152. If the Golden Cross is greater than 1, then the 50 day moving average is above the 200 day moving average – indicating a positive share price momentum. If the Golden Cross is less than 1, then the 50 day moving average is below the 200 day moving average, indicating that the price might drop.

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