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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 | 35.99 | 10.36 | 12.85 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 55.75 | 28.42 | 11.75 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 104.75 | 15.96 | 14.32 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 135.34 | 18.93 | 16.66 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.86 | 83.24 | 9.68 | 33.9% | $0.64 | $1.39 | 14.38% |
| Nebius Group NV | 142.79 | 7.31 | 99.99 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 28.95 | 6.61 | 3.67 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 135.13 | 6.76 | 7.57 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 473.33 | 4.53 | 5.19 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.16 | 2.41 | 4.74 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 74.15 | 27.34 | 5.39 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 29.45 | 10.29 | 8.53 | 9.7% | $0.06 | $0.14 | 10.41% |
| BlackBerry Ltd | 115.75 | 3.77 | 5.14 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 112.78 | 17.96 | 16.05 | 8.0% | $0.8 | $1.52 | 63.81% |
By carefully studying Microsoft, we can deduce the following trends:
The Price to Earnings ratio of 35.99 is 0.32x lower than the industry average, indicating potential undervaluation for the stock.
Considering a Price to Book ratio of 10.36, which is well below the industry average by 0.58x, the stock may be undervalued based on its book value compared to its peers.
The Price to Sales ratio is 12.85, which is 0.8x the industry average. This suggests a possible undervaluation based on sales performance.
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 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion is 60.08x above the industry average, highlighting stronger profitability and robust cash flow generation.
The gross profit of $53.63 Billion is 35.28x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.43% is significantly below the industry average of 63.81%. This suggests a potential struggle in generating increased sales volume.
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.
In light of the Debt-to-Equity ratio, a comparison between Microsoft and its top 4 peers reveals the following information:
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 are all low compared to peers, indicating potential undervaluation. However, the low ROE suggests lower profitability relative to industry standards. On the other hand, the high EBITDA and gross profit signify strong operational performance. The low revenue growth may pose a challenge for future expansion compared to industry competitors.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
