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In the dynamic and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) and its primary competitors in the Software industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.
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 | 37.39 | 10.76 | 13.36 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 59.47 | 30.32 | 12.54 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 113.02 | 17.22 | 15.45 | 4.52% | $0.65 | $2.49 | 5.97% |
| Palo Alto Networks Inc | 136.42 | 18.88 | 16.79 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.55 | 31.31 | 10.29 | 21.88% | $0.56 | $1.32 | 13.64% |
| Nebius Group NV | 161.27 | 8.26 | 112.93 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 27.18 | 6.79 | 3.85 | 5.83% | $0.58 | $0.99 | 30.26% |
| Monday.Com Ltd | 261.71 | 8.60 | 9.57 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 529 | 5.06 | 5.80 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.23 | 2.42 | 4.75 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 78.19 | 28.83 | 5.69 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 24.68 | 8.80 | 7.17 | 9.4% | $0.06 | $0.14 | 10.32% |
| BlackBerry Ltd | 119.25 | 3.88 | 5.30 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 130.66 | 14.2 | 17.51 | 6.99% | $0.78 | $1.51 | 62.84% |
By analyzing Microsoft, we can infer the following trends:
At 37.39, the stock's Price to Earnings ratio is 0.29x less than the industry average, suggesting favorable growth potential.
The current Price to Book ratio of 10.76, which is 0.76x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
The Price to Sales ratio is 13.36, which is 0.76x the industry average. This suggests a possible undervaluation based on sales performance.
The Return on Equity (ROE) of 7.85% is 0.86% above the industry average, highlighting efficient use of equity to generate profits.
Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion, which is 61.62x above the industry average, indicating stronger profitability and robust cash flow generation.
With higher gross profit of $53.63 Billion, which indicates 35.52x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
The company is witnessing a substantial decline in revenue growth, with a rate of 18.43% compared to the industry average of 62.84%, which indicates a challenging sales environment.
The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.
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.
When evaluating Microsoft alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
Microsoft is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.17.
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
For Microsoft in the Software industry, the PE, PB, and PS ratios are all low compared to peers, indicating potential undervaluation. On the other hand, Microsoft's high ROE, EBITDA, and gross profit suggest strong profitability and operational efficiency. However, the low revenue growth rate may be a concern compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
