Investor’s Roundup (EPS Analysis) – Microsoft Corporation (NASDAQ: MSFT)

On Wednesday, Shares of Microsoft Corporation (NASDAQ: MSFT) -0.41% and ended its trading session at $113.98. The company saw 19,352,024 shares trade hands over the course of the day. Given that its average daily volume over the 30 days has been 24.24M shares a day, this signifies a pretty noteworthy change over the norm.

Technical Analysis:

The analysts, on average, are forecasting a $121.82 price target, but the individual stock is already up 56.16% from its recent lows. However, the stock is trading at -1.14% as compared to recent highs. Leading up to this report, we have seen a 4.00% return in the stock price over the last 30 days and a 16.85% return over the past 3 months. Since the starting of the calendar year, the stock’s performance is recorded at 33.25%.

The stock price recently practiced a 5-day change of 2.04% with 1.73 as average true range (ATR). MSFT has a beta of 1.27 and RSI is 62.20. The stock declared an annual dividend of $1.47% per share.

Introduction to Net Income & Its Uses in Most Important Indicators:

Income is money received by an individual or business in exchange for supplying a good or service or through investing capital. Income is consumed to fuel day-to-day expenditures. In businesses, income can refer to a company’s remaining revenues after all expenses and taxes have been paid. In this case, it is also known as “earnings”. Most forms of income are subject to taxation.

However, Net income (NI) is a corporation’s total earnings (or profit); net income is computed by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses. This number appears on a company’s income statement and is an important measure of how profitable the company is over a period of time.

Role of Net Income in Calculating EPS:

Businesses use net income to calculate their earnings per share (EPS). Business analysts often refer to net income to as the bottom line, since it is listed at the bottom of the income statement. In the United Kingdom, NI is known as profit attributable to shareholders. To know the company’s net income – refer to this link: http://finviz.com. Microsoft Corporation (NASDAQ: MSFT) is a stock with 7.62B shares outstanding. As the earnings per share (EPS) formula is stated as earnings available to common shareholders divided by number of common stock shares outstanding, therefore its diluted EPS is calculated to be 3.90 (ttm). EPS is an indicator of company profit because the more earnings a company can generate per share, the more valuable each share is to shareholders.

A key aspect of EPS that’s often overlooked is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) – that company would be more efficient at using its capital to generate income and, all other things being equal would be a “better” company. Shareholders also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

Role of EPS in Calculating Price to Earnings Ratio (P/E):

Earnings per share are generally pondered to be the single most essential variable in determining a share’s price. It is also a key component used to calculate the price-to-earnings valuation (P/E) ratio.

Analysts also use the price-to-earnings (P/E) ratio for stock valuation, which is calculated as market price per share ($113.98) divided by EPS (3.90). Price to earnings ratio (P/E) for MSFT stock is recorded at $29.26. The P/E ratio calculates how expensive a stock price is relative to the earnings produced per share. For example, if the P/E ratio of a stock is 20 times earnings, an analyst compares that P/E ratio to other companies in the same industry and to the ratio for the broader market.

Analysts’ Recommendation to Consider:

Analysts have a mean recommendation of 1.70 on this stock (A rating of less than 2 means buy, “hold” within the 3 range, “sell” within the 4 range, and “strong sell” within the 5 range).

Otto Woods

Otto Woods

Markets Editor I am Otto Woods and I’m passionate about business and finance news with over 4 years in the industry starting as a writer working my way up into senior positions. I am the driving force behind hotstockspotter.com with a vision to broaden the company’s readership throughout 2016. I am an editor and reporter of “Technology” category.

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