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In the dynamic and fiercely competitive business environment, conducting a thorough analysis of companies is crucial for investors and industry enthusiasts. In this article, we will perform an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in relation to its major competitors in the Software industry. By closely examining crucial financial metrics, market position, and growth prospects, we aim to offer 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 | 35.36 | 10.18 | 12.63 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 56.44 | 28.77 | 11.90 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 103.84 | 15.82 | 14.20 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 132.11 | 18.29 | 16.26 | 3.37% | $0.68 | $1.86 | 15.84% |
| Fortinet Inc | 33.14 | 83.95 | 9.48 | 33.9% | $0.56 | $1.32 | 5.82% |
| Nebius Group NV | 142.13 | 7.28 | 99.53 | 16.85% | $0.61 | $0.08 | 594.48% |
| Gen Digital Inc | 26.51 | 6.63 | 3.75 | 5.83% | $0.58 | $0.99 | 30.26% |
| Monday.Com Ltd | 238.18 | 7.83 | 8.71 | 0.14% | $-0.01 | $0.27 | 26.64% |
| UiPath Inc | 471.33 | 4.51 | 5.16 | 0.09% | $-0.02 | $0.3 | 14.38% |
| Dolby Laboratories Inc | 23.99 | 2.39 | 4.70 | 1.78% | $0.07 | $0.27 | 9.25% |
| CommVault Systems Inc | 71.05 | 26.20 | 5.17 | 5.12% | $0.02 | $0.22 | 18.39% |
| Qualys Inc | 28.49 | 9.96 | 8.26 | 9.7% | $0.06 | $0.14 | 10.41% |
| BlackBerry Ltd | 115.50 | 3.76 | 5.13 | 1.83% | $0.02 | $0.1 | 2.69% |
| Average | 120.23 | 17.95 | 16.02 | 8.02% | $0.8 | $1.52 | 63.51% |
Through a meticulous analysis of Microsoft, we can observe the following trends:
The stock's Price to Earnings ratio of 35.36 is lower than the industry average by 0.29x, suggesting potential value in the eyes of market participants.
Considering a Price to Book ratio of 10.18, which is well below the industry average by 0.57x, the stock may be undervalued based on its book value compared to its peers.
Based on its sales performance, the stock could be deemed undervalued with a Price to Sales ratio of 12.63, which is 0.79x the industry average.
The Return on Equity (ROE) of 7.85% is 0.17% below the industry average, suggesting 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 $48.06 Billion, which is 60.08x above the industry average, indicating stronger profitability and robust cash flow generation.
The company has higher gross profit of $53.63 Billion, which indicates 35.28x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.43% is significantly lower compared to the industry average of 63.51%. This indicates a potential fall in the company's sales performance.
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 considering the Debt-to-Equity ratio, Microsoft can be compared to its top 4 peers, leading to the following observations:
Microsoft is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.17.
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. However, the low ROE suggests lower profitability relative to industry peers. On the other hand, Microsoft's high EBITDA and gross profit signify strong operational performance. The low revenue growth may be a concern for future prospects compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: MSFT
