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 | 35.61 | 11.14 | 12.67 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 47.14 | 46.86 | 9.62 | 30.01% | $5.44 | $9.4 | 6.86% |
| ServiceNow Inc | 164.69 | 23.48 | 20.99 | 4.81% | $0.67 | $2.21 | 22.25% |
| Palo Alto Networks Inc | 50.92 | 21.79 | 16.82 | 6.33% | $0.45 | $1.58 | 13.88% |
| CrowdStrike Holdings Inc | 686.18 | 28.19 | 23.39 | -0.57% | $0.05 | $0.76 | 28.52% |
| Fortinet Inc | 47.88 | 80.43 | 12.87 | 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 | 653.02 | 14.42 | 15.92 | -1.28% | $-0.02 | $0.23 | 32.67% |
| Dolby Laboratories Inc | 29.60 | 3.07 | 6.08 | 2.39% | $0.07 | $0.27 | 4.9% |
| CommVault Systems Inc | 43.25 | 26.82 | 8.57 | 5.56% | $0.02 | $0.19 | 16.06% |
| QXO Inc | 30.09 | 1.54 | 27.41 | -0.21% | $-0.03 | $0.01 | -2.0% |
| Qualys Inc | 34.79 | 12.83 | 9.98 | 10.53% | $0.05 | $0.13 | 8.36% |
| Teradata Corp | 37.28 | 24.26 | 1.75 | 32.0% | $0.08 | $0.27 | 0.46% |
| Progress Software Corp | 36.92 | 6.92 | 4.26 | 6.88% | $0.06 | $0.15 | 2.11% |
| SolarWinds Corp | 62.23 | 1.71 | 2.99 | 0.94% | $0.07 | $0.18 | 5.5% |
| Average | 139.65 | 21.53 | 11.84 | 13.97% | $0.58 | $1.24 | 11.12% |
By closely studying Microsoft, we can observe the following trends:
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At 35.61, 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 11.14, which is 0.52x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
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With a relatively high Price to Sales ratio of 12.67, which is 1.07x the industry average, the stock might be considered overvalued based on sales performance.
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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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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 gross profit of $45.49 Billion is 36.69x above that of its industry, highlighting 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 11.12%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio assesses the extent to which a company relies on borrowed funds compared to its equity.
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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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.
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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 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, and gross profit, Microsoft shows strong performance, indicating efficient operations and profitability. The high revenue growth further supports Microsoft's competitive position in the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
