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Microsoft Corp. (MSFT)

Price to FCFE (P/FCFE)

Difficulty: Intermediate

Microsoft Corp., FCFE calculation

USD $ in millions

	12 months ended	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
	Net income
	Net noncash charges
	Changes in operating assets and liabilities
	Net cash from operations
	Proceeds from issuance (repayments) of short-term debt, maturities of 90 days or less, net
	Proceeds from issuance of debt
	Repayments of debt
	Additions to property and equipment
	Free cash flow to equity (FCFE)

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 2016 to 2017 but then declined significantly from 2017 to 2018.

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

No. shares of common stock outstanding
Selected Financial Data (USD $)
Free cash flow to equity (FCFE) (in millions)
FCFE per share
Current share price (P)
Ratio
P/FCFE
Benchmarks
P/FCFE, Competitors
Adobe Inc.
Alphabet Inc.
Facebook Inc.
International Business Machines Corp.
Intuit Inc.
Oracle Corp.
salesforce.com inc.
P/FCFE, Sector
Software & Computer Services
P/FCFE, Industry
Technology

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, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
	No. shares of common stock outstanding¹
	Selected Financial Data (USD $)
	Free cash flow to equity (FCFE) (in millions)²
	FCFE per share⁴
	Share price^1, 3
	Ratio
	P/FCFE⁵
	Benchmarks
	P/FCFE, Competitors
	Adobe Inc.
	Alphabet Inc.
	Facebook Inc.
	International Business Machines Corp.
	Intuit Inc.
	Oracle Corp.
	salesforce.com inc.
	P/FCFE, Sector
	Software & Computer Services
	P/FCFE, Industry
	Technology

¹ Data adjusted for splits and stock dividends.

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

2018 Calculations

⁴ FCFE per share = FCFE ÷ No. shares of common stock outstanding
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⁵ P/FCFE = Share price ÷ FCFE per share
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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 declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

	Microsoft Corp.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality