In today's rapidly changing and fiercely competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies. 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 | 35.38 | 11.07 | 12.59 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 42.19 | 35.11 | 8.93 | 25.66% | $5.75 | $9.97 | 8.64% |
| ServiceNow Inc | 170.85 | 24.36 | 21.77 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 47.60 | 20.37 | 15.73 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 718.45 | 29.51 | 24.49 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 48.84 | 82.04 | 13.13 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 27.60 | 8.03 | 4.47 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 575.49 | 12.71 | 14.03 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 30.29 | 3.14 | 6.23 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 41.63 | 25.82 | 8.24 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 24 | 1.23 | 21.87 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 30.85 | 11.37 | 8.85 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 37.20 | 24.21 | 1.74 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 34.15 | 6.47 | 3.94 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 65.23 | 1.79 | 3.13 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 135.31 | 20.44 | 11.18 | 13.66% | $0.6 | $1.28 | 11.24% |
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Through a detailed examination of Microsoft, we can deduce the following trends:
With a Price to Earnings ratio of 35.38, which is 0.26x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
With a Price to Book ratio of 11.07, significantly falling below the industry average by 0.54x, it suggests undervaluation and the possibility of untapped growth prospects.
The stock's relatively high Price to Sales ratio of 12.59, surpassing the industry average by 1.13x, 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.
The company has higher gross profit of $45.49 Billion, which indicates 35.54x above the industry average, indicating 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 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.
By evaluating Microsoft against its top 4 peers in terms of the Debt-to-Equity ratio, the following observations arise:
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 company is undervalued compared to its peers. However, the high PS ratio indicates that the market values Microsoft's sales more highly. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft demonstrates strong performance relative to its industry competitors.
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.
