LSE:MCRO

Stock Analysis Report

Micro Focus International

Executive Summary

Micro Focus International plc, an infrastructure software company, develops, sells, and supports software products and solutions to small and medium size enterprises.

Rewards

Trading at 43% below its fair value

Earnings are forecast to grow 84.73% per year

Pays a high and reliable dividend of 11.39%

Risk Analysis

Interest payments are not well covered by earnings

Dividend of 11.39% is not well covered by earnings

Highly volatile share price over past 3 months

Shareholders have been diluted in the past year



Snowflake Analysis

Established dividend payer and fair value.


Similar Companies

Share Price & News

How has Micro Focus International's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: MCRO's share price has been volatile over the past 3 months.


Market Performance


7 Day Return

0.1%

MCRO

-0.8%

GB Software

-0.9%

GB Market


1 Year Return

-64.0%

MCRO

14.3%

GB Software

6.2%

GB Market

Return vs Industry: MCRO underperformed the UK Software industry which returned 15.7% over the past year.

Return vs Market: MCRO underperformed the UK Market which returned 6.6% over the past year.


Shareholder returns

MCROIndustryMarket
7 Day0.1%-0.8%-0.9%
30 Day-30.5%-1.8%-3.1%
90 Day-28.0%8.1%3.9%
1 Year-53.3%-64.0%22.1%14.3%11.9%6.2%
3 Year-58.6%-72.4%13.7%-4.0%17.3%2.4%
5 Year-12.8%-44.9%55.9%29.3%34.1%3.2%

Price Volatility Vs. Market

How volatile is Micro Focus International's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Micro Focus International undervalued compared to its fair value and its price relative to the market?

43.0%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: MCRO (£7.86) is trading below our estimate of fair value (£13.79)

Significantly Below Fair Value: MCRO is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: MCRO is unprofitable, so we can't compare its PE Ratio to the Software industry average.

PE vs Market: MCRO is unprofitable, so we can't compare its PE Ratio to the UK market.


Price to Earnings Growth Ratio

PEG Ratio: Insufficient data to calculate MCRO's PEG Ratio to determine if it is good value.


Price to Book Ratio

PB vs Industry: MCRO is good value based on its PB Ratio (0.5x) compared to the GB Software industry average (3.4x).


Next Steps

Future Growth

How is Micro Focus International forecast to perform in the next 1 to 3 years based on estimates from 11 analysts?

84.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: MCRO is forecast to become profitable over the next 3 years, which is considered faster growth than the savings rate (0.5%).

Earnings vs Market: MCRO is forecast to become profitable over the next 3 years, which is considered above average market growth.

High Growth Earnings: MCRO's is expected to become profitable in the next 3 years.

Revenue vs Market: MCRO's revenue is expected to decline over the next 3 years (-4.4% per year).

High Growth Revenue: MCRO's revenue is forecast to decline over the next 3 years (-4.4% per year).


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: MCRO's Return on Equity is forecast to be low in 3 years time (12.6%).


Next Steps

Past Performance

How has Micro Focus International performed over the past 5 years?

6.9%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: MCRO is currently unprofitable.

Growing Profit Margin: MCRO is currently unprofitable.


Past Earnings Growth Analysis

Earnings Trend: MCRO is unprofitable, but has reduced losses over the past 5 years at a rate of 6.9% per year.

Accelerating Growth: Unable to compare MCRO's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: MCRO is unprofitable, making it difficult to compare its past year earnings growth to the Software industry (8%).


Return on Equity

High ROE: MCRO has a negative Return on Equity (-0.29%), as it is currently unprofitable.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Micro Focus International's financial position?


Financial Position Analysis

Short Term Liabilities: MCRO's short term assets ($1.4B) do not cover its short term liabilities ($1.8B).

Long Term Liabilities: MCRO's short term assets ($1.4B) do not cover its long term liabilities ($6.2B).


Debt to Equity History and Analysis

Debt Level: MCRO's debt to equity ratio (74.4%) is considered high.

Reducing Debt: MCRO's debt to equity ratio has reduced from 2728.8% to 74.4% over the past 5 years.


Balance Sheet

Inventory Level: MCRO has a low level of unsold assets or inventory.

Debt Coverage by Assets: MCRO's debt is not covered by short term assets (assets are 0.3x debt).


Cash Runway Analysis

For companies that have on average been loss making in the past we assess whether they have at least 1 year of cash runway.

Stable Cash Runway: MCRO has been profitable on average in the past, therefore cash runway is not a concern.

Forecast Cash Runway: MCRO has been profitable on average in the past, therefore cash runway is not a concern.


Next Steps

Dividend

What is Micro Focus International's current dividend yield, its reliability and sustainability?

11.39%

Current Dividend Yield


Upcoming Dividend Payment

Purchase Micro Focus International before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company11.4%marketbottom25%1.8%markettop25%5.1%industryaverage2.3%forecastin3Years8.5%

Current dividend yield vs market & industry

Notable Dividend: MCRO's dividend (11.39%) is higher than the bottom 25% of dividend payers in the UK market (1.81%).

High Dividend: MCRO's dividend (11.39%) is in the top 25% of dividend payers in the UK market (5.1%)


Stability and Growth of Payments

Stable Dividend: MCRO's dividends per share have been stable in the past 10 years.

Growing Dividend: MCRO's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: MCRO is paying a dividend but the company is unprofitable.


Future Payout to Shareholders

Future Dividend Coverage: MCRO's dividends in 3 years are forecast to be covered by earnings (51.9% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

2.1yrs

Average management tenure


CEO

Stephen Murdoch (52yo)

1.9yrs

Tenure

US$7,710,068

Compensation

Mr. Stephen Murdoch has been the Chief Executive Officer and Director of Micro Focus International plc since March 19, 2018 and served as its Chief Operating Officer from September 2017 to March 19, 2018. ...


CEO Compensation Analysis

Compensation vs Market: Stephen's total compensation ($USD10.04M) is above average for companies of similar size in the UK market ($USD2.22M).

Compensation vs Earnings: Stephen's compensation has increased whilst the company is unprofitable.


Leadership Team

NamePositionTenureCompensationOwnership
Stephen Murdoch
CEO & Director1.9yrsUS$7.71m0.10% $2.6m
Mike Phillips
Director of Mergers & Acquisition2.1yrsUS$19.32mno data
Brian McArthur-Muscroft
CFO & Director1yrsno datano data
Paul Rodgers
Chief Operating Officer4yrsno datano data
Jerome Labat
Chief Technology Officer0yrsno datano data
Ben Donnelly
Interim Head of Investor Relations0yrsno datano data
Jane Smithard
Group General Counsel13.8yrsno datano data
Tim Brill
Head of Corporate Communication & Investor Relations0yrsno datano data
Genefa Murphy
Chief Marketing Officer0.3yrsno datano data
Ian Fraser
Chief Human Resources Officer2.1yrsno datano data

2.1yrs

Average Tenure

55.5yo

Average Age

Experienced Management: MCRO's management team is considered experienced (2.1 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Stephen Murdoch
CEO & Director1.9yrsUS$7.71m0.10% $2.6m
Brian McArthur-Muscroft
CFO & Director1yrsno datano data
Lawton Fitt
Independent Non-Executive Director2.3yrsUS$83.00kno data
Karen Slatford
Senior Independent Non-Executive Director0yrsUS$180.00k0.0053% $139.2k
Gregory Lock
Non-Executive Chairman0yrsno data0.060% $1.6m
Richard Atkins
Independent Non-Executive Director5.8yrsUS$135.00k0.0050% $131.3k
Amanda Brown
Independent Non-Executive Director3.6yrsUS$135.00k0.0014% $36.4k

2.3yrs

Average Tenure

62yo

Average Age

Experienced Board: MCRO's board of directors are not considered experienced ( 2.3 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: MCRO insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 17.3%.


Top Shareholders

Company Information

Micro Focus International plc's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Micro Focus International plc
  • Ticker: MCRO
  • Exchange: LSE
  • Founded: 1976
  • Industry: Application Software
  • Sector: Software
  • Market Cap: UK£2.621b
  • Shares outstanding: 333.38m
  • Website: https://www.microfocus.com

Number of Employees


Location

  • Micro Focus International plc
  • The Lawn
  • 22-30 Old Bath Road
  • Newbury
  • Berkshire
  • RG14 1QN
  • United Kingdom

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
MCROLSE (London Stock Exchange)YesOrdinary SharesGBGBPMay 2005
MCFU.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDMay 2005
M7Q7DB (Deutsche Boerse AG)YesOrdinary SharesDEEURMay 2005
M7Q3DB (Deutsche Boerse AG)YesOrdinary SharesDEGBPMay 2005
M7Q5DB (Deutsche Boerse AG)YesOrdinary SharesDEEURMay 2005
MFGPNYSE (New York Stock Exchange)SPON ADR EACH REP 1 ORD SHSUSUSDSep 2017
MFGP NBMV (Bolsa Mexicana de Valores)SPON ADR EACH REP 1 ORD SHSMXMXNSep 2017
M7Q8DB (Deutsche Boerse AG)SPON ADR EACH REP 1 ORD SHSDEEURSep 2017

Biography

Micro Focus International plc, an infrastructure software company, develops, sells, and supports software products and solutions to small and medium size enterprises. The company offers infrastructure software products that are managed on an investment portfolio. Its product portfolio includes application modernization and connectivity, application delivery management, and IT operations management, as well as security, information management, and Governance. Micro Focus International plc was founded in 1976 and is headquartered in Newbury, the United Kingdom. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/18 21:06
End of Day Share Price2020/02/18 00:00
Earnings2019/10/31
Annual Earnings2019/10/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.