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In today's rapidly changing and fiercely competitive business landscape, it is vital for investors and industry enthusiasts to carefully evaluate companies. In this article, we will perform a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) against its key competitors in the Software industry. By analyzing important 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 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 | 36.07 | 10.38 | 12.88 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 57.94 | 29.54 | 12.22 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 106.36 | 16.20 | 14.54 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 133.24 | 18.44 | 16.40 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 34.26 | 31.98 | 10.50 | 21.88% | $0.56 | $1.32 | 13.64% |
| Nebius Group NV | 151.95 | 7.78 | 106.40 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 26.91 | 6.73 | 3.81 | 5.83% | $0.58 | $0.99 | 30.26% |
| Monday.Com Ltd | 252.93 | 8.31 | 9.25 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 485 | 4.64 | 5.31 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.14 | 2.41 | 4.73 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 73.10 | 26.95 | 5.31 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 28.30 | 9.89 | 8.20 | 9.7% | $0.06 | $0.14 | 10.41% |
| BlackBerry Ltd | 118.75 | 3.87 | 5.27 | 1.83% | $0.02 | $0.1 | 2.69% |
| Teradata Corp | 22.69 | 11.85 | 1.61 | 20.25% | $0.04 | $0.23 | 1.96% |
| Average | 116.58 | 13.74 | 15.66 | 8.04% | $0.74 | $1.42 | 59.38% |
By conducting an in-depth analysis of Microsoft, we can identify the following trends:
The Price to Earnings ratio of 36.07 is 0.31x lower than the industry average, indicating potential undervaluation for the stock.
Considering a Price to Book ratio of 10.38, which is well below the industry average by 0.76x, the stock may be undervalued based on its book value compared to its peers.
With a relatively low Price to Sales ratio of 12.88, which is 0.82x the industry average, the stock might be considered undervalued based on sales performance.
The company has a lower Return on Equity (ROE) of 7.85%, which is 0.19% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion, which is 64.95x above the industry average, implying stronger profitability and robust cash flow generation.
The company has higher gross profit of $53.63 Billion, which indicates 37.77x above the industry average, indicating stronger profitability and higher earnings from its core operations.
With a revenue growth of 18.43%, which is much lower than the industry average of 59.38%, the company is experiencing a notable slowdown in sales expansion.
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.
By analyzing Microsoft in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
Microsoft demonstrates a stronger financial position compared to its top 4 peers in the sector.
With a lower debt-to-equity ratio of 0.17, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.
For Microsoft in the Software industry, the PE, PB, and PS ratios indicate that the company is undervalued compared to its peers. However, the low ROE suggests that Microsoft may not be utilizing its assets efficiently. On the other hand, the high EBITDA and gross profit margins reflect strong operational performance. The low revenue growth rate may be a concern for Microsoft's future prospects in the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
