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A Look at Microsoft’s Valuations

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Inside Microsoft’s price and valuation multiples

Microsoft’s current book value per share of $9.03 compares with an expected book value per share of $8.90. Microsoft (MSFT) stock is trading at a price-to-book value of ~7.6x. The company’s price-to-sales ratio of ~6.1x also compares with its estimated price-to-sales ratio of ~5.5x.

In comparison, its peers FireEye (FEYE), Oracle (ORCL), Snap (SNAP), and Symantec (SYMC) have current book values per share of ~$4.70, ~$12.30, ~$3.90, and ~$5.60, respectively.

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How much debt is Microsoft carrying?

Microsoft Corporation (MSFT) is carrying total debt of ~$84 billion, which combines its short-term debt of ~$7.8 billion and its long-term debt of ~$76.2 billion. Considering that the company has total capital of ~$153.7 billion, its total debt-to-total-capital ratio is 43%.

Looking at the company’s debt in relation to its assets, equity, and EBITDA,[1. earnings before interest, tax, depreciation, and amortization] you’ll find that it has debt-to-assets, debt-to-equity, and debt-to-EBITDA ratios of 120.5x, 0.37x, and 2.8x, respectively.

Can Microsoft easily pay interest on its outstanding debt? The answer lies in examining the company’s interest coverage ratio, which is 45.1x. This ratio sheds light on the company’s ability to pay interest on its debt.

Examining Microsoft’s cash flow metrics

Microsoft has $126 billion in cash on hand. Its price-to-cash-flow and price-to-free-cash-flow ratios stand at 14.3x and 31.4x, respectively. For the trailing 12 months, the company’s EV-to-cash-flow ratio[2. enterprise-value-to-cash-flow] for the company was 13.2x, and its EV-to-free cash flow ratio was 17.1x.

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