In today's rapidly changing and fiercely competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies. In this article, we will conduct a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) against its key competitors in the Software industry. By examining key 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 | 35.59 | 11.14 | 12.67 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 46.76 | 46.48 | 9.54 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 163.31 | 23.28 | 20.81 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 50.61 | 21.65 | 16.72 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 680 | 27.93 | 23.18 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 47.90 | 80.45 | 12.87 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 31.24 | 9.08 | 5.06 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 638.84 | 14.10 | 15.57 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.91 | 3.10 | 6.15 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 43.36 | 26.89 | 8.59 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 30.39 | 1.56 | 27.69 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.35 | 12.66 | 9.85 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 36.95 | 24.05 | 1.73 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.73 | 6.89 | 4.24 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 61.68 | 1.70 | 2.96 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 138.0 | 21.42 | 11.78 | 13.97% | $0.58 | $1.24 | 11.12% |
Upon closer analysis of Microsoft, the following trends become apparent:
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At 35.59, the stock's Price to Earnings ratio is 0.26x less than the industry average, suggesting favorable growth potential.
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With a Price to Book ratio of 11.14, significantly falling below the industry average by 0.52x, it suggests undervaluation and the possibility of untapped growth prospects.
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The stock's relatively high Price to Sales ratio of 12.67, surpassing the industry average by 1.08x, may indicate an aspect of overvaluation in terms of sales performance.
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The Return on Equity (ROE) of 8.87% is 5.1% below the industry average, suggesting 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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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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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 financial metric that helps determine the level of financial risk associated with a company's capital structure.
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 suggest the stock is undervalued compared to peers, indicating potential for growth. However, the high PS ratio implies the stock may be overvalued based on revenue. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft shows strong performance, outperforming industry peers and demonstrating solid financial health.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
