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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 | 34.65 | 9.97 | 12.37 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 52.21 | 26.62 | 11.01 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 98.72 | 14.99 | 13.50 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 124.94 | 17.47 | 15.38 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 32.81 | 80.66 | 9.38 | 33.9% | $0.64 | $1.39 | 14.38% |
| Gen Digital Inc | 28.64 | 6.54 | 3.64 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 121.07 | 6.06 | 6.78 | 1.06% | $0.0 | $0.28 | 26.24% |
| UiPath Inc | 449.33 | 4.30 | 4.92 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 24.81 | 2.37 | 4.70 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 67.90 | 25.04 | 4.94 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 26.79 | 9.36 | 7.76 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 21.98 | 11.32 | 1.56 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 95.38 | 18.61 | 7.6 | 8.95% | $0.82 | $1.67 | 14.79% |
By closely examining Microsoft, we can identify the following trends:
At 34.65, the stock's Price to Earnings ratio is 0.36x less than the industry average, suggesting favorable growth potential.
The current Price to Book ratio of 9.97, which is 0.54x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
With a relatively high Price to Sales ratio of 12.37, which is 1.63x the industry average, the stock might be considered overvalued based on sales performance.
The Return on Equity (ROE) of 7.85% is 1.1% 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 58.61x above the industry average, indicating stronger profitability and robust cash flow generation.
The gross profit of $53.63 Billion is 32.11x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.43% exceeds the industry average of 14.79%, indicating strong sales performance and market outperformance.
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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 terms of the Debt-to-Equity ratio, Microsoft can be assessed by comparing it to its top 4 peers, resulting in the following observations:
Compared to its top 4 peers, Microsoft has a stronger financial position indicated by its lower debt-to-equity ratio of 0.17.
This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.
For Microsoft in the Software industry, the PE and PB ratios suggest the stock is undervalued compared to peers, indicating potential for growth. However, the high PS ratio implies the stock may be overvalued based on revenue. In terms of ROE, Microsoft's performance is lower than industry peers, while its high EBITDA and gross profit indicate strong operational efficiency. The high revenue growth further highlights Microsoft's competitive position in the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
