Assessing Microsoft's Performance Against Competitors In Software Industry

In today's rapidly changing and highly competitive business world, it is vital for investors and industry enthusiasts to carefully assess companies. In this article, we will perform a comprehensive industry comparison, evaluating Microsoft MSFT against its key competitors in the Software industry. By analyzing important 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 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 38.17 13.16 13.85 9.53% $33.39 $42.4 17.58%
Oracle Corp 31.96 59.20 6.49 50.61% $5.3 $9.41 7.11%
ServiceNow Inc 91.30 20.70 17.62 3.98% $0.51 $1.92 25.62%
Palo Alto Networks Inc 43.20 20.69 13.04 53.52% $0.21 $1.48 19.33%
CrowdStrike Holdings Inc 835.30 32.45 24.64 2.48% $0.12 $0.64 32.63%
Gen Digital Inc 9.47 5.51 3.56 5.96% $0.47 $0.77 1.6%
Dolby Laboratories Inc 41.77 3.27 6.13 2.85% $0.09 $0.28 -5.78%
Qualys Inc 41.23 16.69 11.27 11.75% $0.05 $0.12 10.49%
Teradata Corp 59.52 26.27 2.03 -5.45% $0.06 $0.28 1.11%
N-able Inc 96.62 3.26 5.54 1.35% $0.03 $0.09 13.22%
Progress Software Corp 32.90 4.77 3.19 4.91% $0.06 $0.15 12.46%
Average 128.33 19.28 9.35 13.2% $0.69 $1.51 11.78%

After examining Microsoft, the following trends can be inferred:

  • The stock's Price to Earnings ratio of 38.17 is lower than the industry average by 0.3x, suggesting potential value in the eyes of market participants.

  • The current Price to Book ratio of 13.16, which is 0.68x the industry average, is substantially lower than the industry average, indicating potential undervaluation.

  • The Price to Sales ratio of 13.85, which is 1.48x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

  • The company has a lower Return on Equity (ROE) of 9.53%, which is 3.67% 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 $33.39 Billion, which is 48.39x above the industry average, indicating stronger profitability and robust cash flow generation.

  • The gross profit of $42.4 Billion is 28.08x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.

  • With a revenue growth of 17.58%, which surpasses the industry average of 11.78%, the company is demonstrating robust sales expansion and gaining market share.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.

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 terms of the Debt-to-Equity ratio, Microsoft stands in comparison with its top 4 peers, leading to the following comparisons:

  • When considering the debt-to-equity ratio, Microsoft exhibits a stronger financial position compared to its top 4 peers.

  • This indicates that the company has a favorable balance between debt and equity, with a lower debt-to-equity ratio of 0.37, which can be perceived as a positive aspect by investors.

Key Takeaways

For Microsoft in the Software industry, the PE and PB ratios suggest the stock is undervalued compared to peers, indicating potential for growth. However, the high PS ratio implies the stock may be overvalued based on revenue. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft shows strong performance metrics compared to industry peers, indicating efficient operations and potential for further growth.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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