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In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) vis-à-vis its key competitors in the Software industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal is to provide valuable insights and highlight company's performance in 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 | 35.34 | 10.17 | 12.62 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 55.38 | 28.24 | 11.68 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 104.22 | 15.87 | 14.25 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 132.68 | 18.36 | 16.33 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.66 | 85.26 | 9.63 | 33.9% | $0.56 | $1.32 | 5.82% |
| Nebius Group NV | 144.52 | 7.40 | 101.20 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 28.32 | 6.46 | 3.60 | 5.56% | $0.58 | $0.99 | -2.94% |
| Monday.Com Ltd | 249.99 | 8.21 | 9.14 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 476.67 | 4.56 | 5.22 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.03 | 2.40 | 4.71 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 72.41 | 26.70 | 5.26 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 29 | 10.14 | 8.40 | 9.7% | $0.06 | $0.14 | 10.41% |
| BlackBerry Ltd | 114 | 3.71 | 5.06 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 122.07 | 18.11 | 16.21 | 8.0% | $0.8 | $1.52 | 60.74% |
After examining Microsoft, the following trends can be inferred:
At 35.34, the stock's Price to Earnings ratio is 0.29x less than the industry average, suggesting favorable growth potential.
Considering a Price to Book ratio of 10.17, which is well below the industry average by 0.56x, the stock may be undervalued based on its book value compared to its peers.
Based on its sales performance, the stock could be deemed undervalued with a Price to Sales ratio of 12.62, which is 0.78x the industry average.
The company has a lower Return on Equity (ROE) of 7.85%, which is 0.15% 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 60.08x above the industry average, implying stronger profitability and robust cash flow generation.
The company has higher gross profit of $53.63 Billion, which indicates 35.28x 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 60.74%, the company is experiencing a notable slowdown in sales expansion.
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.
When assessing Microsoft against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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 0.17.
This suggests that the company has a more favorable balance between debt and equity, which can be seen as a positive aspect for investors.
For Microsoft in the Software industry, the PE, PB, and PS ratios are all low compared to peers, indicating potential undervaluation. However, the low ROE suggests lower profitability relative to industry peers. On the other hand, Microsoft's high EBITDA and gross profit signify strong operational performance, while the low revenue growth may raise concerns about future prospects compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
