In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) and its primary competitors in the Software industry. By closely examining key financial metrics, market position, and growth prospects, our aim is 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 | 36.63 | 11.46 | 13.04 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 49.40 | 49.11 | 10.08 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 175.13 | 24.97 | 22.32 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 52.65 | 22.53 | 17.39 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 716.96 | 29.45 | 24.44 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 49.85 | 83.74 | 13.40 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 31.46 | 9.15 | 5.10 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 690.86 | 15.25 | 16.84 | -1.28% | $-0.02 | $0.23 | 32.67% |
| CommVault Systems Inc | 44.61 | 27.66 | 8.83 | 5.56% | $0.02 | $0.19 | 16.06% |
| Dolby Laboratories Inc | 29.42 | 3.05 | 6.05 | 2.39% | $0.07 | $0.27 | 4.9% |
| QXO Inc | 30.51 | 1.57 | 27.80 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.30 | 12.65 | 9.84 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 37.78 | 24.58 | 1.77 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 37.07 | 6.95 | 4.28 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65.95 | 1.81 | 3.17 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 146.14 | 22.32 | 12.24 | 13.97% | $0.58 | $1.24 | 11.12% |
After thoroughly examining Microsoft, the following trends can be inferred:
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At 36.63, the stock's Price to Earnings ratio is 0.25x less than the industry average, suggesting favorable growth potential.
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Considering a Price to Book ratio of 11.46, which is well below the industry average by 0.51x, the stock may be undervalued based on its book value compared to its peers.
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With a relatively high Price to Sales ratio of 13.04, which is 1.07x the industry average, the stock might be considered overvalued based on sales performance.
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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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With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 65.91x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
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Compared to its industry, the company has higher gross profit of $45.49 Billion, which indicates 36.69x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 16.04% exceeds the industry average of 11.12%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a measure that indicates the level of debt a company has taken on relative to the value of its assets net of liabilities.
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.
By analyzing Microsoft in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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When considering the debt-to-equity ratio, Microsoft exhibits a stronger financial position compared to its top 4 peers.
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This indicates that the company has a favorable balance between debt and equity, with a lower debt-to-equity ratio of 0.21, which can be perceived as a positive aspect by investors.
Key Takeaways
For Microsoft in the Software industry, the PE and PB ratios are low compared to peers, indicating potential undervaluation. However, the high PS ratio suggests investors are willing to pay a premium for revenue. The low ROE may indicate inefficiency in generating profits, while high EBITDA and gross profit signify strong operational performance. Additionally, the high revenue growth implies a positive outlook for future earnings potential.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
