Microsoft Corp. (MSFT)

Price to FCFE (P/FCFE)

Difficulty: Intermediate

Microsoft Corp., FCFE calculation

USD $ in millions

12 months ended	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013	Jun 30, 2012
Net income	21,204	16,798	12,193	22,074	21,863	16,978
Net noncash charges	16,651	18,603	15,962	9,804	8,554	14,915
Changes in operating assets and liabilities	1,652	(2,076)	1,513	624	(1,375)	(174)
Net cash from operations	39,507	33,325	29,668	32,502	29,042	31,719
Proceeds from issuance (repayments) of short-term debt, maturities of 90 days or less, net	(4,963)	7,195	4,481	500	–	–
Proceeds from issuance of debt	44,344	13,884	10,680	10,350	4,883	–
Repayments of debt	(7,922)	(2,796)	(1,500)	(3,888)	(1,346)	–
Additions to property and equipment	(8,129)	(8,343)	(5,944)	(5,485)	(4,257)	(2,305)
Free cash flow to equity (FCFE)	62,837	43,265	37,385	33,979	28,322	29,414

Item	Description	The company
FCFE	Free cash flow to equity is the cash flow available to Microsoft Corp.'s equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.	Microsoft Corp.'s FCFE increased from 2015 to 2016 and from 2016 to 2017.

Microsoft Corp., current P/FCFE calculation, comparison to benchmarks

No. shares of common stock outstanding	7,683,197,503
Selected Financial Data (USD $)
Free cash flow to equity (FCFE) (in millions)	62,837
FCFE per share	8.18
Current share price (P)	100.86
Ratio
P/FCFE	12.33
Benchmarks
P/FCFE, Competitors
Adobe Systems Inc.	46.08
Alphabet Inc.	34.07
Facebook Inc.	32.83
International Business Machines Corp.	7.87
Oracle Corp.	7.38
salesforce.com inc.	57.81
P/FCFE, Sector
Software & Computer Services	17.88
P/FCFE, Industry
Technology	15.47

If company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.

Otherwise, if company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.

Microsoft Corp., historical P/FCFE calculation, comparison to benchmarks

	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013	Jun 30, 2012
No. shares of common stock outstanding¹	7,702,243,979	7,792,515,573	7,997,980,969	8,239,848,789	8,329,956,402	8,383,396,575
Selected Financial Data (USD $)
Free cash flow to equity (FCFE) (in millions)²	62,837	43,265	37,385	33,979	28,322	29,414
FCFE per share⁴	8.16	5.55	4.67	4.12	3.40	3.51
Share price^1, 3	72.26	56.21	46.70	43.16	31.85	29.16
Ratio
P/FCFE⁵	8.86	10.12	9.99	10.47	9.37	8.31
Benchmarks
P/FCFE, Competitors
Adobe Systems Inc.	35.59	27.41	25.83	31.68	30.61	15.52
Alphabet Inc.	31.41	22.41	29.23	31.52	37.12	–
Facebook Inc.	32.08	33.48	52.13	64.54	164.64	–
International Business Machines Corp.	8.55	10.60	9.60	10.95	9.23	–
Oracle Corp.	8.16	11.68	5.69	8.98	8.95	10.15
salesforce.com inc.	25.44	50.00	164.03	21.68	51.38	–
P/FCFE, Sector
Software & Computer Services	15.66	16.08	14.59	15.61	15.57	–
P/FCFE, Industry
Technology	13.52	12.81	9.94	12.44	12.44	–

¹ Data adjusted for splits and stock dividends.

³ Close price on the filing date of Microsoft Corp.'s Annual Report.

2017 Calculations

⁴ FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 62,837,000,000 ÷ 7,702,243,979 = 8.16

⁵ P/FCFE = Share price ÷ FCFE per share
= 72.26 ÷ 8.16 = 8.86

Ratio	Description	The company
P/FCFE	Price to free cash flow to equity is cash valuation indicator of stockholders' equity.	Microsoft Corp.'s P/FCFE ratio increased from 2015 to 2016 but then declined significantly from 2016 to 2017.