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General information
Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.
  • Good financial results growth rate 15.2% (average between last period year over year growth for revenue and EBITDA), there is slowdown compared to average historical growth rates (17.7%)
  • Dividend yield for the last twelve months 1.0%
  • Free cash flow yield 2.5% (LTM)
  • Share price is 150.0% higher than minimum and 12.5% lower than maximum for the last 3 years
  • The company is overvalued by EV / LTM EBITDA multiple compared to target level (21.1x vs 20.3x)
  • Fundamental value created in LTM (estimate) 13.3%
Key Financials
Ticker: MSFT
Share price, USD: 202.68
Common stocks: 7 628 805 618
Dividend Yield:  1.0%
FCF Yield LTM: 2.5%
EV / LTM EBITDA: 21.1x
Last revenue growth (y/y):  12.4%
Last growth of EBITDA (y/y):  18.0%
Historical revenue growth:  14.1%
Historical growth of EBITDA:  21.2%
Target EV / EBITDA (hist 75% percentile): 20.3x
Express share price potential: -2.0%
Fundamental value created in LTM: 13.3%
EV / LTM EBITDA mutiple calculation
Market Cap ($m): 1 546 206
Net Debt ($m): -54 761
EV (Enterprise Value): 1 491 445
EBITDA LTM ($m): 70 695
EV / LTM EBITDA: 21.1x

Revenue and EBITDA

Quarterly values ($m)

Change (y/y)

Cash Flow

Free Cash Flow ($m)

Net Debt / Cash and Equivalents ($m)

Share price and dividends

Share price

Payment USD per share

Multiple and potential

EV / LTM EBITDA and 75% percentile

Potential dynamics

Value Creation

Fundamental Value Creation is calculated as ratio of value created in the last period to current market cap of the company.

The fundamental value can be created in two ways:
• cash generation in form of dividend payments or debt reduction or share buybacks
• growth of the company enterprise value through improving financial results

The growth of enterprise value in the last period is estimated as product of:
• annualized increase of EBITDA in the last reporting period year over year
• relevant EV/EBITDA multiple (average between actual EV/EBITDA for the company and average general level of 10.0x is applied)

Parameter
#
Formula
Value
    
    
            EBITDA (pre LTM Q)
(1)
16 122
            EBITDA (last Q)
(2)
19 019
            EBITDA LTM
(3)
70 695
    
    
        EBITDA LTM / last Q
(4)
(3) / (2)
3.717
    Gain of EBITDA (mln $)
(5)
( (2)-(1) ) * (4)
10 768
    
    
            EV
(6)
1 491 445
        Mult
(7)
(6) / (3)
21.1x
        Mult common
(8)
const
10.0x
    Mult avg
(9)
avgerage
15.5x
    
    
    Equity+
(10)
(5) * (9)
167 431
    FCF LTM
(11)
38 660
    
    
Value+
(12)
(10) + (11)
206 091
Cap
(13)
1 546 206
    
    
Fundamental value creation
(14)
(12) / (13)
13.3%

Potential

EBITDA LTM       70 695
 
EBITDA E       71 701
Mult aim       20.3x
 
EV E       1 457 887
NetDebt corr       -57 833
 
Cap E       1 515 720
Cap       1 546 206
Growth potential            -2.0%