Market Analysis: Microsoft And Competitors In Software Industry

In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft MSFT and its primary competitors in the Software industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.

Get Started

Start Futures Trading Fast — with a $200 Bonus

Join Plus500 today and get up to $200 to start trading real futures. Practice with free paper trading, then jump into live markets with lightning-fast execution, low commissions, and full regulatory protection.

Get Started

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).

By closely examining Microsoft, we can identify the following trends:

• With a Price to Earnings ratio of 33.71, which is 0.39x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.

• With a Price to Book ratio of 10.07, significantly falling below the industry average by 0.45x, it suggests undervaluation and the possibility of untapped growth prospects.

• The Price to Sales ratio of 12.06, which is 1.5x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

• The company has a higher Return on Equity (ROE) of 8.27%, which is 0.47% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.

• The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $40.71 Billion, which is 61.68x above the industry average, indicating stronger profitability and robust cash flow generation.

• The gross profit of $48.15 Billion is 35.15x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.

• With a revenue growth of 13.27%, which surpasses the industry average of 10.8%, the company is demonstrating robust sales expansion and gaining market share.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.

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:

• 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 0.19, 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 company is undervalued compared to its peers, indicating potential for growth. However, the high PS ratio implies that the stock may be overvalued based on its revenue. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft outperforms its industry peers, showcasing strong financial health and growth prospects.

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