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Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in comparison to its major competitors within the Software industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in 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 | 38.97 | 11.50 | 14.08 | 8.19% | $44.43 | $52.43 | 18.1% |
| Oracle Corp | 65.14 | 33.21 | 13.73 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 119.03 | 17.96 | 16.42 | 3.65% | $0.65 | $2.49 | 22.38% |
| Palo Alto Networks Inc | 137.68 | 19.06 | 16.94 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.98 | 31.72 | 10.42 | 21.88% | $0.56 | $1.32 | 13.64% |
| Nebius Group NV | 162.90 | 8.34 | 114.07 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 27.96 | 6.99 | 3.96 | 5.83% | $0.58 | $0.99 | 30.26% |
| Monday.Com Ltd | 261.55 | 8.59 | 9.57 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 579.67 | 5.54 | 6.35 | 0.09% | $-0.02 | $0.3 | 14.38% |
| CommVault Systems Inc | 97.29 | 21.23 | 7.49 | 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 | 25.11 | 8.95 | 7.30 | 9.4% | $0.06 | $0.14 | 10.32% |
| BlackBerry Ltd | 120 | 3.91 | 5.33 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 137.94 | 14.0 | 18.04 | 7.06% | $0.78 | $1.51 | 64.8% |
Through a detailed examination of Microsoft, we can deduce the following trends:
At 38.97, the stock's Price to Earnings ratio is 0.28x less than the industry average, suggesting favorable growth potential.
With a Price to Book ratio of 11.5, significantly falling below the industry average by 0.82x, it suggests undervaluation and the possibility of untapped growth prospects.
The Price to Sales ratio is 14.08, which is 0.78x the industry average. This suggests a possible undervaluation based on sales performance.
With a Return on Equity (ROE) of 8.19% that is 1.13% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $44.43 Billion is 56.96x above the industry average, highlighting stronger profitability and robust cash flow generation.
The gross profit of $52.43 Billion is 34.72x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
With a revenue growth of 18.1%, which is much lower than the industry average of 64.8%, the company is experiencing a notable slowdown in sales expansion.
The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative to its 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.
When examining Microsoft in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
Microsoft demonstrates a stronger financial position compared to its top 4 peers in the sector.
With a lower debt-to-equity ratio of 0.18, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.
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 future performance compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
