Amidst the fast-paced and highly competitive business environment of today, conducting comprehensive company analysis is essential for investors and industry enthusiasts. In this article, we will delve into an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in comparison to its major competitors within the Software industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of 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 | 36.18 | 11.32 | 12.88 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 41.98 | 34.93 | 8.89 | 25.66% | $5.75 | $9.97 | 8.64% |
| ServiceNow Inc | 171.20 | 24.41 | 21.82 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 48.90 | 20.92 | 16.16 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 715.84 | 29.41 | 24.41 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 48.89 | 82.11 | 13.14 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 28.14 | 8.18 | 4.56 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 547.02 | 12.08 | 13.34 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.22 | 3.03 | 6.01 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 39.99 | 24.80 | 7.92 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 27.86 | 1.43 | 25.38 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 31.20 | 11.50 | 8.95 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 37.86 | 24.64 | 1.77 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 35.70 | 6.69 | 4.12 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65.68 | 1.81 | 3.16 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 133.53 | 20.42 | 11.4 | 13.66% | $0.6 | $1.28 | 11.24% |
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By thoroughly analyzing Microsoft, we can discern the following trends:
With a Price to Earnings ratio of 36.18, 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 11.32, which is well below the industry average by 0.55x, the stock may be undervalued based on its book value compared to its peers.
The Price to Sales ratio of 12.88, which is 1.13x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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.
Compared to its industry, 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.
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% 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 is an important measure to assess the financial structure and risk profile 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 light of the Debt-to-Equity ratio, a comparison between Microsoft and its top 4 peers reveals the following information:
Microsoft has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.21.
This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator by investors.
Key Takeaways
For Microsoft in the Software industry, the PE and PB ratios are low compared to peers, indicating potential undervaluation. However, the high PS ratio suggests overvaluation based on revenue. The low ROE implies lower profitability, while high EBITDA and gross profit signify strong operational performance. Additionally, the high revenue growth indicates a positive outlook for future earnings potential 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.
