In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. 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 | 35.94 | 11.25 | 12.79 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 41.35 | 34.42 | 8.75 | 25.66% | $5.75 | $9.97 | 8.64% |
| ServiceNow Inc | 169.51 | 24.17 | 21.60 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 48.82 | 20.89 | 16.13 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 708.82 | 29.12 | 24.17 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 48.45 | 81.38 | 13.02 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 27.97 | 8.13 | 4.53 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 539.19 | 11.90 | 13.14 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 28.86 | 3 | 5.93 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 39.66 | 24.60 | 7.86 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 26.54 | 1.36 | 24.18 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 30.72 | 11.32 | 8.81 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 37.82 | 24.61 | 1.77 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 35.10 | 6.58 | 4.05 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65 | 1.79 | 3.12 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 131.99 | 20.23 | 11.22 | 13.66% | $0.6 | $1.28 | 11.24% |
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When closely examining Microsoft, the following trends emerge:
With a Price to Earnings ratio of 35.94, which is 0.27x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
Considering a Price to Book ratio of 11.25, which is well below the industry average by 0.56x, the stock may be undervalued based on its book value compared to its peers.
With a relatively high Price to Sales ratio of 12.79, which is 1.14x the industry average, the stock might be considered overvalued based on sales performance.
The Return on Equity (ROE) of 8.87% is 4.79% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 63.72x above the industry average, indicating stronger profitability and robust cash flow generation.
Compared to its industry, the company has higher gross profit of $45.49 Billion, which indicates 35.54x above the industry average, indicating stronger profitability and higher earnings from its core operations.
With a revenue growth of 16.04%, which surpasses the industry average of 11.24%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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 assessing Microsoft against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
Compared to its top 4 peers, Microsoft has a stronger financial position indicated by its lower debt-to-equity ratio of 0.21.
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, EBITDA, and gross profit, Microsoft shows strong performance with high profitability and revenue growth compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
