Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. 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 | 34.93 | 10.93 | 12.43 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 47.09 | 46.81 | 9.61 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 162.21 | 23.13 | 20.67 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 49.85 | 21.33 | 16.47 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 681.55 | 28 | 23.24 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 47.27 | 79.39 | 12.70 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 31.15 | 9.06 | 5.05 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 667.33 | 14.73 | 16.27 | -1.28% | $-0.02 | $0.23 | 32.67% |
| CommVault Systems Inc | 43.56 | 27.02 | 8.63 | 5.56% | $0.02 | $0.19 | 16.06% |
| Dolby Laboratories Inc | 29.07 | 3.01 | 5.98 | 2.39% | $0.07 | $0.27 | 4.9% |
| QXO Inc | 29.44 | 1.51 | 26.82 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.15 | 12.59 | 9.79 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 36.39 | 23.68 | 1.70 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.32 | 6.81 | 4.19 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 59.73 | 1.64 | 2.87 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 139.65 | 21.34 | 11.71 | 13.97% | $0.58 | $1.24 | 11.12% |
By closely studying Microsoft, we can observe the following trends:
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At 34.93, the stock's Price to Earnings ratio is 0.25x less than the industry average, suggesting favorable growth potential.
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The current Price to Book ratio of 10.93, which is 0.51x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
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The Price to Sales ratio of 12.43, which is 1.06x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The company has a lower Return on Equity (ROE) of 8.87%, which is 5.1% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
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Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 65.91x above the industry average, indicating stronger profitability and robust cash flow generation.
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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.
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The company's revenue growth of 16.04% exceeds the industry average of 11.12%, 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:
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Microsoft has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.21.
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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 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 and growth potential compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
