In today's rapidly changing and highly competitive business world, it is vital for investors and industry enthusiasts to carefully assess companies. In this article, we will perform a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) against its key competitors in the Software industry. By analyzing important financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company's performance within the industry.
Microsoft Background
Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Microsoft Corp | 36.55 | 11.44 | 13.01 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 48 | 47.71 | 9.79 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 175.03 | 24.96 | 22.30 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 52.27 | 22.37 | 17.27 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 715.37 | 29.39 | 24.39 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 49.48 | 83.10 | 13.30 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 31.57 | 9.18 | 5.11 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 662.84 | 14.63 | 16.16 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.49 | 3.06 | 6.06 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 43.72 | 27.11 | 8.66 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 30 | 1.54 | 27.33 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.61 | 12.76 | 9.93 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 38.04 | 24.75 | 1.78 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.91 | 6.92 | 4.26 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 66.36 | 1.83 | 3.19 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 143.83 | 22.09 | 12.11 | 13.97% | $0.58 | $1.24 | 11.12% |
Through an analysis of Microsoft, we can infer the following trends:
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The stock's Price to Earnings ratio of 36.55 is lower than the industry average by 0.25x, suggesting potential value in the eyes of market participants.
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Considering a Price to Book ratio of 11.44, which is well below the industry average by 0.52x, the stock may be undervalued based on its book value compared to its peers.
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The Price to Sales ratio of 13.01, which is 1.07x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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With a Return on Equity (ROE) of 8.87% that is 5.1% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
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The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 65.91x above the industry average, indicating stronger profitability and robust cash flow generation.
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With higher gross profit of $45.49 Billion, which indicates 36.69x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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With a revenue growth of 16.04%, which surpasses the industry average of 11.12%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When examining Microsoft in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
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Compared to its top 4 peers, Microsoft has a stronger financial position indicated by its lower debt-to-equity ratio of 0.21.
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This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.
Key Takeaways
For Microsoft in the Software industry, the PE and PB ratios suggest that the stock is undervalued compared to its peers. However, the high PS ratio indicates that the stock may be overvalued based on revenue. In terms of ROE, Microsoft's performance is lower than its peers, while its high EBITDA and gross profit margins indicate strong operational efficiency. Additionally, the high revenue growth rate suggests potential for future expansion and market dominance.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
