In-Depth Analysis: Microsoft Versus Competitors In Software Industry
In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in relation to its major competitors in the Software industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company's performance in 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 | 32.87 | 9.82 | 11.77 | 8.27% | $40.71 | $48.15 | 13.27% |
| Oracle Corp | 34.15 | 24.39 | 7.45 | 19.27% | $5.89 | $9.94 | 6.4% |
| ServiceNow Inc | 129.98 | 19.56 | 17.44 | 4.66% | $0.72 | $2.44 | 18.63% |
| Palo Alto Networks Inc | 105.24 | 19.34 | 15.41 | 4.35% | $0.41 | $1.66 | 14.29% |
| Fortinet Inc | 46.11 | 53.64 | 13.51 | 43.82% | $0.66 | $1.35 | 17.31% |
| Gen Digital Inc | 25.10 | 7.33 | 4.11 | 7.48% | $0.45 | $0.79 | 4.01% |
| Monday.Com Ltd | 446.98 | 13.66 | 14.95 | 2.3% | $0.07 | $0.24 | 32.29% |
| Dolby Laboratories Inc | 28.21 | 2.93 | 5.63 | 2.72% | $0.11 | $0.32 | 13.13% |
| CommVault Systems Inc | 98.73 | 22.45 | 7.53 | 10.11% | $0.02 | $0.21 | 4.72% |
| Qualys Inc | 27.32 | 9.68 | 7.81 | 9.49% | $0.05 | $0.13 | 10.11% |
| Progress Software Corp | 47.35 | 5.99 | 3.31 | 2.51% | $0.07 | $0.19 | 28.88% |
| Teradata Corp | 18.66 | 15.63 | 1.21 | 19.38% | $0.06 | $0.24 | -10.5% |
| Rapid7 Inc | 58.52 | 84.91 | 1.75 | -25.97% | $0.02 | $0.15 | 5.36% |
| Average | 88.86 | 23.29 | 8.34 | 8.34% | $0.71 | $1.47 | 12.05% |
After a detailed analysis of Microsoft, the following trends become apparent:
The Price to Earnings ratio of 32.87 is 0.37x lower than the industry average, indicating potential undervaluation for the stock.
Considering a Price to Book ratio of 9.82, which is well below the industry average by 0.42x, the stock may be undervalued based on its book value compared to its peers.
The stock's relatively high Price to Sales ratio of 11.77, surpassing the industry average by 1.41x, may indicate an aspect of overvaluation in terms of sales performance.
The company has a lower Return on Equity (ROE) of 8.27%, which is 0.07% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $40.71 Billion, which is 57.34x above the industry average, indicating stronger profitability and robust cash flow generation.
The gross profit of $48.15 Billion is 32.76x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
The company is experiencing remarkable revenue growth, with a rate of 13.27%, outperforming the industry average of 12.05%.
Debt To Equity Ratio
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.
When evaluating Microsoft alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
Compared to its top 4 peers, Microsoft has a stronger financial position indicated by its lower debt-to-equity ratio of 0.19.
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.
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 market values its sales more highly. In terms of ROE, Microsoft's performance is lower than its peers, while its high EBITDA and gross profit margins indicate strong operational efficiency. Additionally, the high revenue growth suggests potential for future expansion and market dominance.
This article was generated by Benzinga's automated content engine and reviewed by an editor.