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 | 34.58 | 10.82 | 12.31 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 48.45 | 48.16 | 9.89 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 163.97 | 23.38 | 20.90 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 50.11 | 21.44 | 16.56 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 527.07 | 31.25 | 25.68 | 1.75% | $0.12 | $0.73 | 31.74% |
| Fortinet Inc | 46.79 | 78.59 | 12.57 | 90.26% | $0.66 | $1.24 | 13.0% |
| Gen Digital Inc | 30.93 | 8.99 | 5.01 | 7.92% | $0.51 | $0.78 | 3.07% |
| Monday.Com Ltd | 688.60 | 15.20 | 16.79 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.85 | 3.09 | 6.14 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 44.57 | 27.64 | 8.83 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 30.63 | 1.57 | 27.91 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.53 | 12.73 | 9.91 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 36.62 | 23.83 | 1.71 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 37.58 | 7.05 | 4.34 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 60.41 | 1.66 | 2.90 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 130.72 | 21.76 | 12.08 | 14.13% | $0.58 | $1.24 | 11.35% |
Through a detailed examination of Microsoft, we can deduce the following trends:
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With a Price to Earnings ratio of 34.58, 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.
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With a Price to Book ratio of 10.82, significantly falling below the industry average by 0.5x, it suggests undervaluation and the possibility of untapped growth prospects.
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With a relatively high Price to Sales ratio of 12.31, which is 1.02x the industry average, the stock might be considered overvalued based on sales performance.
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The Return on Equity (ROE) of 8.87% is 5.26% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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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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With higher gross profit of $45.49 Billion, which indicates 36.69x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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The company is experiencing remarkable revenue growth, with a rate of 16.04%, outperforming the industry average of 11.35%.
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.
By analyzing Microsoft in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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Microsoft exhibits a stronger financial position compared to its top 4 peers in the sector, as indicated 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 seen as a positive aspect for investors.
Key Takeaways
The low PE and PB ratios suggest that Microsoft is undervalued compared to its peers in the Software industry. However, the high PS ratio indicates that the market values Microsoft's revenue higher relative to its peers. The low ROE implies that Microsoft is less efficient in generating profits from shareholders' equity. On the other hand, the high EBITDA, gross profit, and revenue growth signify strong operational performance and growth potential for Microsoft within the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
