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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 | 38.16 | 11.27 | 13.79 | 8.19% | $44.43 | $52.43 | 18.1% |
| Oracle Corp | 64.83 | 33.06 | 13.67 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 118.13 | 17.83 | 16.30 | 3.65% | $0.65 | $2.49 | 22.38% |
| Palo Alto Networks Inc | 134.39 | 18.60 | 16.54 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.84 | 31.59 | 10.37 | 21.88% | $0.56 | $1.32 | 13.64% |
| Nebius Group NV | 137.87 | 7.06 | 96.54 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 28.32 | 7.08 | 4.01 | 5.83% | $0.58 | $0.99 | 30.26% |
| Monday.Com Ltd | 258.20 | 8.48 | 9.44 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 514.67 | 4.92 | 5.64 | 0.09% | $-0.02 | $0.3 | 14.38% |
| CommVault Systems Inc | 93.87 | 20.48 | 7.22 | 6.81% | $0.03 | $0.23 | 25.51% |
| Dolby Laboratories Inc | 24.94 | 2.49 | 4.89 | 1.78% | $0.07 | $0.27 | 9.25% |
| Qualys Inc | 25.48 | 9.08 | 7.41 | 9.4% | $0.06 | $0.14 | 10.32% |
| BlackBerry Ltd | 115.25 | 3.75 | 5.12 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 129.15 | 13.7 | 16.43 | 7.06% | $0.78 | $1.51 | 64.8% |
By thoroughly analyzing Microsoft, we can discern the following trends:
The Price to Earnings ratio of 38.16 is 0.3x lower than the industry average, indicating potential undervaluation for the stock.
With a Price to Book ratio of 11.27, significantly falling below the industry average by 0.82x, it suggests undervaluation and the possibility of untapped growth prospects.
Based on its sales performance, the stock could be deemed undervalued with a Price to Sales ratio of 13.79, which is 0.84x the industry average.
The company has a higher Return on Equity (ROE) of 8.19%, which is 1.13% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $44.43 Billion, which is 56.96x above the industry average, implying stronger profitability and robust cash flow generation.
With higher gross profit of $52.43 Billion, which indicates 34.72x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.1% is significantly below the industry average of 64.8%. This suggests a potential struggle in generating increased sales volume.
The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to equity.
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:
Microsoft is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.18.
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
For Microsoft in the Software industry, the PE, PB, and PS ratios are all low compared to peers, indicating potential undervaluation. On the other hand, Microsoft's high ROE, EBITDA, and gross profit suggest strong profitability and operational efficiency. However, the low revenue growth rate may be a concern for its future performance relative to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
