In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in relation to its major competitors in the Software industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company's performance in 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 | 36.93 | 11.56 | 13.15 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 42.39 | 35.28 | 8.97 | 25.66% | $5.75 | $9.97 | 8.64% |
| ServiceNow Inc | 174.63 | 24.90 | 22.25 | 4.81% | $0.67 | $2.21 | 22.25% |
| CrowdStrike Holdings Inc | 721.61 | 29.64 | 24.60 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 49.22 | 82.67 | 13.23 | 90.26% | $0.66 | $1.24 | 13.0% |
| Palo Alto Networks Inc | 50.99 | 21.82 | 16.85 | 6.33% | $0.45 | $1.58 | 13.88% |
| Gen Digital Inc | 30.16 | 8.77 | 4.89 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 635.07 | 14.02 | 15.48 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.43 | 3.05 | 6.05 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 42.81 | 26.55 | 8.48 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 28.32 | 1.45 | 25.80 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 32.57 | 12.01 | 9.34 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 38 | 24.73 | 1.78 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 37.04 | 6.95 | 4.27 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 66.91 | 1.84 | 3.21 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 141.37 | 20.98 | 11.8 | 13.66% | $0.6 | $1.28 | 11.24% |
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Through an analysis of Microsoft, we can infer the following trends:
A Price to Earnings ratio of 36.93 significantly below the industry average by 0.26x suggests undervaluation. This can make the stock appealing for those seeking growth.
The current Price to Book ratio of 11.56, which is 0.55x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
The stock's relatively high Price to Sales ratio of 13.15, surpassing the industry average by 1.11x, may indicate an aspect of overvaluation in terms of sales performance.
With a Return on Equity (ROE) of 8.87% that is 4.79% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 63.72x above the industry average, implying stronger profitability and robust cash flow generation.
With higher gross profit of $45.49 Billion, which indicates 35.54x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
The company's revenue growth of 16.04% is notably higher compared to the industry average of 11.24%, showcasing exceptional sales performance and strong demand for its products or services.
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.
When assessing Microsoft against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
In terms of the debt-to-equity ratio, Microsoft has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.21.
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 market values its sales more highly. In terms of ROE, Microsoft's performance is weaker than its peers, while its high EBITDA and gross profit margins indicate strong operational efficiency. Additionally, the high revenue growth rate suggests potential for future expansion and market dominance.
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.
