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In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. In this article, we will conduct a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) against its key competitors in the Software industry. By examining key 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 | 34.03 | 9.79 | 12.15 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 48.77 | 24.87 | 10.28 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 96.79 | 14.70 | 13.24 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 117.13 | 14.89 | 13.74 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 32.12 | 78.95 | 9.18 | 33.9% | $0.64 | $1.39 | 14.38% |
| Gen Digital Inc | 28.66 | 6.55 | 3.64 | 5.56% | $0.5 | $0.95 | 25.26% |
| Monday.Com Ltd | 117.95 | 5.90 | 6.61 | 1.06% | $0.0 | $0.28 | 26.24% |
| UiPath Inc | 424.33 | 4.06 | 4.65 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 25 | 2.39 | 4.73 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 66.85 | 24.65 | 4.86 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 26.72 | 9.34 | 7.74 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 21.99 | 11.32 | 1.56 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 91.48 | 17.97 | 7.29 | 8.95% | $0.82 | $1.67 | 14.79% |
By carefully studying Microsoft, we can deduce the following trends:
At 34.03, the stock's Price to Earnings ratio is 0.37x less than the industry average, suggesting favorable growth potential.
The current Price to Book ratio of 9.79, which is 0.54x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
The stock's relatively high Price to Sales ratio of 12.15, surpassing the industry average by 1.67x, may indicate an aspect of overvaluation in terms of sales performance.
With a Return on Equity (ROE) of 7.85% that is 1.1% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion, which is 58.61x above the industry average, implying stronger profitability and robust cash flow generation.
Compared to its industry, the company has higher gross profit of $53.63 Billion, which indicates 32.11x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company is experiencing remarkable revenue growth, with a rate of 18.43%, outperforming the industry average of 14.79%.
The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.
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 evaluating Microsoft against its top 4 peers in terms of the Debt-to-Equity ratio, the following observations arise:
Among its top 4 peers, Microsoft has a stronger financial position with a lower debt-to-equity ratio of 0.17.
This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively 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, EBITDA, gross profit, and revenue growth, Microsoft shows strong performance, outperforming industry peers and demonstrating solid financial health.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
