Are The Quant Signals for Microsoft Corporation (NasdaqGS:MSFT) Telling a Positive Story? - Augusta 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 63. 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 55.

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 6734. 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 9.371246. 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 18.717299, and a current Price to Earnings ratio of 25.740263. 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 4836. 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.

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