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In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial 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 | 36.29 | 10.44 | 12.96 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 51.59 | 26.30 | 10.88 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 102.83 | 15.61 | 14.06 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 128.28 | 17.94 | 15.79 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.87 | 83.27 | 9.69 | 33.9% | $0.64 | $1.39 | 14.38% |
| Nebius Group NV | 97.63 | 4.37 | 57.90 | -2.79% | $0.01 | $0.1 | 355.14% |
| Gen Digital Inc | 29.34 | 6.70 | 3.72 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 130.52 | 6.53 | 7.31 | 1.06% | $0.0 | $0.28 | 26.24% |
| UiPath Inc | 467.67 | 4.47 | 5.12 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.19 | 2.41 | 4.74 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 72.37 | 26.69 | 5.26 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 27.84 | 9.73 | 8.07 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 22.51 | 11.59 | 1.60 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 99.05 | 17.97 | 12.01 | 7.97% | $0.76 | $1.54 | 43.15% |
Upon closer analysis of Microsoft, the following trends become apparent:
The stock's Price to Earnings ratio of 36.29 is lower than the industry average by 0.37x, suggesting potential value in the eyes of market participants.
The current Price to Book ratio of 10.44, which is 0.58x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
With a relatively high Price to Sales ratio of 12.96, which is 1.08x the industry average, the stock might be considered overvalued based on sales performance.
The Return on Equity (ROE) of 7.85% is 0.12% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion, which is 63.24x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
The gross profit of $53.63 Billion is 34.82x above that of its industry, highlighting 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 43.15%, the company is experiencing a notable slowdown in sales expansion.
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 comparing Microsoft with its top 4 peers based on the Debt-to-Equity ratio, the following insights can be observed:
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 and PB ratios suggest that the stock is undervalued compared to its peers. However, the high PS ratio indicates that the stock may be overvalued based on revenue. In terms of ROE, Microsoft's performance is lower than its peers, while its EBITDA and gross profit margins are higher. The low revenue growth rate may be a concern for the company's future prospects compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
