Exploring The Competitive Space: Microsoft Versus Industry Peers In Software
In the fast-paced and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in comparison to its major competitors within the Software industry. By analyzing crucial 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 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 | 34.99 | 10.07 | 12.50 | 7.85% | $48.06 | $53.63 | 18.43% |
| Oracle Corp | 51.28 | 26.15 | 10.81 | 13.12% | $6.12 | $10.04 | 12.17% |
| ServiceNow Inc | 103.37 | 15.70 | 14.14 | 4.52% | $0.89 | $2.63 | 21.81% |
| Palo Alto Networks Inc | 123.42 | 15.69 | 14.47 | 4.05% | $0.5 | $1.84 | 15.66% |
| Fortinet Inc | 34.36 | 84.47 | 9.83 | 33.9% | $0.64 | $1.39 | 14.38% |
| Gen Digital Inc | 29.82 | 6.81 | 3.79 | 5.56% | $0.5 | $0.95 | 25.26% |
| UiPath Inc | 45.19 | 5.27 | 6.68 | 11.08% | $0.02 | $0.34 | 15.92% |
| Monday.Com Ltd | 132.12 | 6.61 | 7.40 | 1.06% | $0.0 | $0.28 | 26.24% |
| Dolby Laboratories Inc | 25.76 | 2.46 | 4.88 | 1.89% | $0.06 | $0.27 | 0.73% |
| Qualys Inc | 29.08 | 10.16 | 8.42 | 9.7% | $0.06 | $0.14 | 10.41% |
| CommVault Systems Inc | 69.43 | 25.60 | 5.05 | 5.12% | $0.02 | $0.22 | 18.39% |
| Teradata Corp | 25.95 | 13.36 | 1.84 | 20.25% | $0.09 | $0.25 | -5.45% |
| Average | 60.89 | 19.3 | 7.94 | 10.02% | $0.81 | $1.67 | 14.14% |
Through a detailed examination of Microsoft, we can deduce the following trends:
The stock's Price to Earnings ratio of 34.99 is lower than the industry average by 0.57x, suggesting potential value in the eyes of market participants.
With a Price to Book ratio of 10.07, significantly falling below the industry average by 0.52x, it suggests undervaluation and the possibility of untapped growth prospects.
The Price to Sales ratio of 12.5, which is 1.57x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
With a Return on Equity (ROE) of 7.85% that is 2.17% 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 $48.06 Billion, which is 59.33x above the industry average, indicating stronger profitability and robust cash flow generation.
The company has higher gross profit of $53.63 Billion, which indicates 32.11x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company's revenue growth of 18.43% is notably higher compared to the industry average of 14.14%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.
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.
In light of the Debt-to-Equity ratio, a comparison between Microsoft and its top 4 peers reveals the following information:
Microsoft exhibits a stronger financial position compared to its top 4 peers in the sector, as indicated by its lower debt-to-equity ratio of 0.17.
This suggests that the company has a more favorable balance between debt and equity, which can be seen as a positive aspect for 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 stock may be overvalued based on revenue. In terms of ROE, Microsoft is performing below average, while its high EBITDA and gross profit margins indicate strong operational efficiency. Additionally, the high revenue growth rate suggests potential for future expansion and market dominance within the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.