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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 | 36.18 | 10.41 | 12.92 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 54.66 | 27.87 | 11.53 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 104.07 | 15.85 | 14.23 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 136.42 | 19.08 | 16.79 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 34.43 | 84.63 | 9.85 | 33.9% | $0.64 | $1.39 | 14.38% |
| Nebius Group NV | 132.75 | 6.80 | 92.96 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 29.82 | 6.81 | 3.79 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 134.29 | 6.72 | 7.52 | 1.06% | $0.0 | $0.28 | 26.24% |
| UiPath Inc | 479 | 4.58 | 5.25 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.27 | 2.42 | 4.76 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 73.06 | 26.94 | 5.31 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 29.81 | 10.42 | 8.64 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 23.17 | 11.93 | 1.64 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 104.65 | 18.67 | 15.19 | 9.61% | $0.81 | $1.53 | 63.1% |
Upon a comprehensive analysis of Microsoft, the following trends can be discerned:
At 36.18, the stock's Price to Earnings ratio is 0.35x less than the industry average, suggesting favorable growth potential.
The current Price to Book ratio of 10.41, which is 0.56x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
Based on its sales performance, the stock could be deemed undervalued with a Price to Sales ratio of 12.92, which is 0.85x the industry average.
The Return on Equity (ROE) of 7.85% is 1.76% below the industry average, suggesting potential inefficiency in utilizing 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 59.33x above the industry average, indicating stronger profitability and robust cash flow generation.
Compared to its industry, the company has higher gross profit of $53.63 Billion, which indicates 35.05x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.43% is significantly below the industry average of 63.1%. This suggests a potential struggle in generating increased sales volume.
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
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:
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.
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 0.17.
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. The low revenue growth may be a concern for future prospects compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
