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In the dynamic and fiercely competitive business environment, conducting a thorough analysis of companies is crucial for investors and industry enthusiasts. In this article, we will perform an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in relation to its major competitors in the Software industry. By closely examining crucial financial metrics, market position, and growth prospects, we aim to offer 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 | 36.09 | 10.39 | 12.89 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 50.89 | 25.95 | 10.73 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 101.06 | 15.34 | 13.82 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 126.81 | 17.74 | 15.61 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.72 | 82.89 | 9.64 | 33.9% | $0.64 | $1.39 | 14.38% |
| Nebius Group NV | 100.48 | 4.50 | 59.59 | -2.79% | $0.01 | $0.1 | 355.14% |
| Gen Digital Inc | 28.75 | 6.57 | 3.65 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 122.23 | 6.12 | 6.85 | 1.06% | $0.0 | $0.28 | 26.24% |
| UiPath Inc | 450.67 | 4.31 | 4.94 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 23.82 | 2.38 | 4.67 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 71.51 | 26.37 | 5.20 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 27.03 | 9.45 | 7.83 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 21.60 | 11.12 | 1.53 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 96.55 | 17.73 | 12.01 | 7.97% | $0.76 | $1.54 | 43.15% |
Through an analysis of Microsoft, we can infer the following trends:
With a Price to Earnings ratio of 36.09, which is 0.37x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
With a Price to Book ratio of 10.39, significantly falling below the industry average by 0.59x, it suggests undervaluation and the possibility of untapped growth prospects.
The stock's relatively high Price to Sales ratio of 12.89, surpassing the industry average by 1.07x, may indicate an aspect of overvaluation in terms of sales performance.
With a Return on Equity (ROE) of 7.85% that is 0.12% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion, which is 63.24x 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 34.82x 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 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.
By considering the Debt-to-Equity ratio, Microsoft can be compared to its top 4 peers, leading to the following observations:
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 ratio is low compared to peers, indicating potential undervaluation. The PB ratio is also low, suggesting a possible bargain opportunity. However, the PS ratio is high, signaling rich valuation relative to industry peers. In terms of ROE, Microsoft shows lower profitability compared to peers. The high EBITDA and gross profit levels reflect strong operational performance, while the low revenue growth implies slower expansion compared to industry counterparts.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
