Is Microsoft (USA Stocks:MSFT) low volatility a good sign for private investors?
 | By Vlad Skutelnik | Macroaxis Story |
As we navigate through the current market volatility, Microsoft (NASDAQ: MSFT), a leading player in the Software - Infrastructure industry, is a stock that investors are closely watching. With a market valuation of $409.72 billion, Microsoft has shown resilience in the face of market fluctuations. The company's fiscal year ends in June, and it has demonstrated a positive momentum indicator of 5.79, suggesting a strong performance. Analysts have a positive outlook on Microsoft, with an overall consensus rating of 'Buy'. Out of 36 estimates, 32 are strong buys, 3 are buys, and only 2 are holds. The analyst target price estimated value stands at $412.64, with the highest estimated target price reaching up to $600. This indicates a potential upside from the current day's median price of $407.16. However, investors should also consider the possible downside price of $410.75 and the naive expected forecast value of $411.73. The daily balance of power at 1.02 also suggests that buyers are slightly more active than sellers. In conclusion, Microsoft's strong fundamentals and positive analyst consensus make it well-positioned to weather the latest market volatility. However, investors should remain cautious and monitor the stock's performance closely. Microsoft is currently generating 0.2898% in daily expected returns and assumes a risk of 0.9764% (based on volatility in return distribution) over a 60-day horizon. Given the heightened interest from eager investors in the software sector, it's worth examining Microsoft in the context of its current volatility. We will assess whether Microsoft's present volatility will persist into March.
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Reviewed by Rifka Kats
Microsoft (NASDAQ: MSFT) has demonstrated resilience in the face of market volatility, with a Coefficient of Variation at 347.42, indicating a relatively stable return on investment. Despite a Total Risk Alpha of -0.09, suggesting a potential loss, the company's Sortino Ratio of 0.0896 highlights its ability to generate positive returns while minimizing downside risk. This, coupled with the company's robust position in the Software - Infrastructure industry, suggests that Microsoft is well-positioned to weather the latest market volatility.
Main Points
Microsoft currently holds $59.97 billion in liabilities, with a Debt to Equity (D/E) ratio of 0.44. This ratio is approximately average when compared to similar companies. The company has a current ratio of 1.8, which is within the standard range for the sector. Debt can be beneficial for Microsoft until it encounters difficulties in paying it off, either with new capital or with free cash flow. Therefore, if Microsoft cannot meet its legal obligations to repay its debt, shareholders could potentially lose their entire investment. However, a more common scenario is when companies like Microsoft issue additional shares at discounted prices, thereby diluting the value of existing shares. In this context, debt can be an excellent tool for Microsoft to invest in growth at high rates of return. When considering Microsoft's use of debt, it is important to also take into account its cash and equity positions.Volatility is a rate at which the price of Microsoft or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Microsoft may increase or decrease. In other words, similar to Microsoft's beta indicator, it measures the risk of Microsoft and helps estimate the fluctuations that may happen in a short period of time. So if prices of Microsoft fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.
How important is Microsoft's Liquidity
Microsoft financial leverage refers to using borrowed capital as a funding source to finance Microsoft ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Microsoft financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Microsoft's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Microsoft's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Microsoft's total debt and its cash.
Microsoft Gross Profit
Microsoft Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Microsoft previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Microsoft Gross Profit growth over the last 10 years. Please check Microsoft's gross profit and other fundamental indicators for more details.
Microsoft Volatility Drivers
Microsoft unsystematic risk is unique to Microsoft and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Microsoft you can also buy Block Inc. You can also mitigate this risk by investing in the information technology sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Microsoft important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Microsoft income statement and balance sheet. Here are more details about Microsoft volatility.Click cells to compare fundamentals
What is driving Microsoft Investor Appetite?
The newest bullish price patterns experienced by current Microsoft shareholders may encourage private investors to take a closer look at the firm as it is trading at a share price of 409.72 on 24,387,990 in trading volume. The company directors and management have been very successful in rebalancing the firm assets at opportune times to take advantage of market volatility in December. The stock standard deviation of daily returns for 90 days investing horizon is currently 0.98. The very small Stock volatility is a good signal to private investors with longer-term investment horizons. Every cloud has a silver lining, and Microsoft (NASDAQ: MSFT) seems to be the silver lining in the recent market volatility.Despite the turbulent market conditions, Microsoft's robust operating margin of 0.48% and a solid current ratio of 1.84X, indicate a strong financial footing, enabling it to weather market storms. Furthermore, the tech giant's risk-adjusted performance of 0.1764, coupled with a beta of 0.88, suggests lower volatility compared to the overall market. The company's healthy cash flow from operations, amounting to $87.58 billion, also provides a cushion against potential market downturns. Lastly, Microsoft's five-year return of 1.18% demonstrates its long-term growth potential and resilience. Thus, despite the current market volatility, Microsoft appears well-positioned to maintain its financial stability and continue its growth trajectory. .
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