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 Background
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 | 32.71 | 9.41 | 11.68 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 35.92 | 18.33 | 9.06 | 22.68% | $9.51 | $10.68 | 14.22% |
| ServiceNow Inc | 76.97 | 11.89 | 10.53 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 118.77 | 15.10 | 13.93 | 4.05% | $0.5 | $1.84 | 15.66% |
| Fortinet Inc | 31.02 | 76.26 | 8.87 | 33.9% | $0.64 | $1.39 | 14.38% |
| Gen Digital Inc | 28.68 | 6.55 | 3.64 | 5.56% | $0.5 | $0.95 | 25.26% |
| UiPath Inc | 34.14 | 3.98 | 5.04 | 11.08% | $0.02 | $0.34 | 15.92% |
| Monday.Com Ltd | 103.01 | 5.15 | 5.77 | 1.06% | $0.0 | $0.28 | 26.24% |
| Dolby Laboratories Inc | 23.85 | 2.27 | 4.51 | 1.89% | $0.06 | $0.27 | 0.73% |
| CommVault Systems Inc | 69.41 | 25.60 | 5.05 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 26.08 | 9.11 | 7.56 | 9.7% | $0.06 | $0.14 | 10.41% |
| Teradata Corp | 24.60 | 12.67 | 1.75 | 20.25% | $0.09 | $0.25 | -5.45% |
| BlackBerry Ltd | 97 | 3.09 | 4.33 | 1.87% | $0.02 | $0.11 | -1.25% |
| Average | 55.79 | 15.83 | 6.67 | 10.14% | $1.03 | $1.59 | 13.03% |
When conducting a detailed analysis of Microsoft, the following trends become clear:
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With a Price to Earnings ratio of 32.71, which is 0.59x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
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Considering a Price to Book ratio of 9.41, which is well below the industry average by 0.59x, the stock may be undervalued based on its book value compared to its peers.
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The Price to Sales ratio of 11.68, which is 1.75x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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With a Return on Equity (ROE) of 7.85% that is 2.29% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $48.06 Billion is 46.66x above the industry average, highlighting stronger profitability and robust cash flow generation.
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With higher gross profit of $53.63 Billion, which indicates 33.73x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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The company is experiencing remarkable revenue growth, with a rate of 18.43%, outperforming the industry average of 13.03%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.
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 evaluating Microsoft alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
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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.
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This suggests that the company has a more favorable balance between debt and equity, which can be seen as a positive aspect for investors.
Key Takeaways
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, EBITDA, and gross profit, Microsoft shows strong performance with high profitability and revenue growth compared to industry peers.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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