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 | 34.97 | 10.94 | 12.45 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 47.64 | 47.36 | 9.72 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 163.46 | 23.31 | 20.83 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 50.30 | 21.52 | 16.62 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 678.37 | 27.87 | 23.13 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 47.76 | 80.22 | 12.84 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 31.16 | 9.06 | 5.05 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 663.63 | 14.65 | 16.18 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.12 | 3.02 | 5.98 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 43.55 | 27.01 | 8.63 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 29.19 | 1.50 | 26.60 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 33.91 | 12.50 | 9.73 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 36.35 | 23.66 | 1.70 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.78 | 6.90 | 4.24 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 60.68 | 1.67 | 2.92 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 139.42 | 21.45 | 11.73 | 13.97% | $0.58 | $1.24 | 11.12% |
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By thoroughly analyzing Microsoft, we can discern the following trends:
The Price to Earnings ratio of 34.97 is 0.25x lower than the industry average, indicating potential undervaluation for the stock.
With a Price to Book ratio of 10.94, significantly falling below the industry average by 0.51x, it suggests undervaluation and the possibility of untapped growth prospects.
The stock's relatively high Price to Sales ratio of 12.45, surpassing the industry average by 1.06x, may indicate an aspect of overvaluation in terms of sales performance.
The Return on Equity (ROE) of 8.87% is 5.1% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion is 65.91x above the industry average, highlighting stronger profitability and robust cash flow generation.
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.
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 is a key indicator of a company's financial health and its reliance on debt financing.
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 evaluating Microsoft alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
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 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 indicating a healthy financial position.
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.
