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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 | 35.94 | 12.18 | 13.09 | 8.93% | $33.55 | $43.35 | 17.03% |
| Oracle Corp | 30.78 | 57.03 | 6.25 | 50.61% | $5.3 | $9.41 | 7.11% |
| ServiceNow Inc | 77.97 | 18.49 | 15.90 | 4.41% | $0.56 | $2.08 | 24.19% |
| Palo Alto Networks Inc | 46.05 | 22.06 | 13.90 | 53.52% | $0.21 | $1.48 | 19.33% |
| CrowdStrike Holdings Inc | 866.92 | 33.86 | 25.58 | 2.48% | $0.12 | $0.64 | 32.63% |
| Gen Digital Inc | 24.44 | 6.80 | 3.95 | 5.81% | $0.49 | $0.78 | 1.68% |
| Dolby Laboratories Inc | 42.64 | 3.27 | 6.37 | 4.1% | $0.13 | $0.33 | -3.02% |
| Qualys Inc | 34.87 | 13.74 | 9.93 | 10.29% | $0.05 | $0.12 | 11.57% |
| CommVault Systems Inc | 29.69 | 17.48 | 5.98 | 55.72% | $0.02 | $0.18 | 2.99% |
| Teradata Corp | 78.62 | 59.13 | 1.84 | 21.16% | $0.07 | $0.28 | -2.31% |
| N-able Inc | 84.27 | 3.29 | 5.42 | 1.05% | $0.03 | $0.1 | 13.96% |
| Progress Software Corp | 32.87 | 4.77 | 3.19 | 4.91% | $0.06 | $0.15 | 12.46% |
| SolarWinds Corp | 190.67 | 1.50 | 2.49 | 1.14% | $0.07 | $0.17 | 3.94% |
| Average | 128.32 | 20.12 | 8.4 | 17.93% | $0.59 | $1.31 | 10.38% |
By conducting an in-depth analysis of Microsoft, we can identify the following trends:
With a Price to Earnings ratio of 35.94, which is 0.28x 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 12.18, significantly falling below the industry average by 0.61x, it suggests undervaluation and the possibility of untapped growth prospects.
The stock's relatively high Price to Sales ratio of 13.09, surpassing the industry average by 1.56x, may indicate an aspect of overvaluation in terms of sales performance.
With a Return on Equity (ROE) of 8.93% that is 9.0% below the industry average, it appears that the company exhibits 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 $33.55 Billion, which is 56.86x above the industry average, indicating stronger profitability and robust cash flow generation.
With higher gross profit of $43.35 Billion, which indicates 33.09x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
With a revenue growth of 17.03%, which surpasses the industry average of 10.38%, the company is demonstrating robust sales expansion and gaining market share.
The debt-to-equity (D/E) ratio is a measure that indicates the level of debt a company has taken on relative to the value of its assets net of liabilities.
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 analyzing Microsoft in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
Compared to its top 4 peers, Microsoft has a stronger financial position indicated by its lower debt-to-equity ratio of 0.32.
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 that the company is undervalued compared to its peers. However, the high PS ratio indicates that the market values its sales more highly. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft demonstrates strong performance, outperforming its industry peers in these key areas.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
