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 | 36.83 | 11.53 | 13.11 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 46.56 | 37.07 | 9.86 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 174.53 | 24.88 | 22.24 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 50.45 | 21.59 | 16.67 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 693.33 | 28.48 | 23.64 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 48.76 | 81.90 | 13.10 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 30.79 | 8.95 | 4.99 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 674.86 | 14.90 | 16.45 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.52 | 3.06 | 6.07 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 43.71 | 27.11 | 8.66 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 28.35 | 1.46 | 25.83 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.38 | 12.68 | 9.86 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 38.14 | 24.82 | 1.79 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.94 | 6.93 | 4.26 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65.27 | 1.80 | 3.14 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 142.54 | 21.12 | 11.9 | 13.97% | $0.58 | $1.24 | 11.12% |
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When conducting a detailed analysis of Microsoft, the following trends become clear:
A Price to Earnings ratio of 36.83 significantly below the industry average by 0.26x suggests undervaluation. This can make the stock appealing for those seeking growth.
With a Price to Book ratio of 11.53, significantly falling below the industry average by 0.55x, it suggests undervaluation and the possibility of untapped growth prospects.
With a relatively high Price to Sales ratio of 13.11, which is 1.1x the industry average, the stock might be considered overvalued based on sales performance.
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.
Compared to its industry, 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.
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.
The company is experiencing remarkable revenue growth, with a rate of 16.04%, outperforming the industry average of 11.12%.
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.
In terms of the Debt-to-Equity ratio, Microsoft stands in comparison with its top 4 peers, leading to the following comparisons:
Microsoft is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.21.
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
Key Takeaways
For Microsoft in the Software industry, the PE ratio is low compared to peers, indicating potential undervaluation. The PB ratio is also low, suggesting a possible bargain opportunity. However, the PS ratio is high, signaling rich valuation based on revenue. In terms of ROE, Microsoft lags behind peers, while EBITDA and gross profit margins are high, reflecting strong operational performance. Additionally, the high revenue growth rate outpaces industry competitors, indicating a promising outlook for Microsoft.
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.
