In the ever-evolving and intensely competitive business landscape, conducting a thorough company analysis is of utmost importance for investors and industry followers. In this article, we will carry out an in-depth industry comparison, assessing Microsoft (NASDAQ:MSFT) alongside its primary competitors in the Software industry. By meticulously examining key financial metrics, market positioning, and growth prospects, we aim to offer valuable insights to 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 | 37.53 | 11.74 | 13.36 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 41.49 | 34.53 | 8.78 | 25.66% | $5.75 | $9.97 | 8.64% |
| ServiceNow Inc | 173.63 | 24.76 | 22.13 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 52.20 | 22.34 | 17.25 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 738.08 | 30.32 | 25.16 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 49.06 | 82.39 | 13.18 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 29.68 | 8.63 | 4.81 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 585.58 | 12.93 | 14.28 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.17 | 3.02 | 6 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 42.24 | 26.20 | 8.37 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 28.56 | 1.47 | 26.02 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 32.21 | 11.87 | 9.24 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 38.60 | 25.12 | 1.81 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 37.02 | 6.94 | 4.27 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65.32 | 1.80 | 3.14 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 138.77 | 20.88 | 11.75 | 13.66% | $0.6 | $1.28 | 11.24% |
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When analyzing Microsoft, the following trends become evident:
The stock's Price to Earnings ratio of 37.53 is lower than the industry average by 0.27x, suggesting potential value in the eyes of market participants.
The current Price to Book ratio of 11.74, which is 0.56x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
With a relatively high Price to Sales ratio of 13.36, 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 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion is 63.72x above the industry average, highlighting stronger profitability and robust cash flow generation.
The gross profit of $45.49 Billion is 35.54x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
The company's revenue growth of 16.04% exceeds the industry average of 11.24%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.
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:
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 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 shows lower profitability compared to peers. EBITDA and gross profit margins are high, reflecting strong operational performance. The high revenue growth rate indicates a positive outlook for future earnings potential.
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.
