In today's rapidly evolving and fiercely competitive business landscape, it is crucial for investors and industry analysts to conduct comprehensive company evaluations. In this article, we will undertake an in-depth industry comparison, assessing Microsoft MSFT alongside its primary competitors in the Software industry. By meticulously examining crucial financial indicators, market positioning, and growth potential, we aim to provide valuable insights to 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 | 39.09 | 11.68 | 13.99 | 8.27% | $40.71 | $48.15 | 13.27% |
Oracle Corp | 55.74 | 33.22 | 12.08 | 18.43% | $6.83 | $11.16 | 11.31% |
ServiceNow Inc | 129.77 | 19.54 | 17.42 | 4.66% | $0.72 | $2.44 | 18.63% |
Palo Alto Networks Inc | 114.49 | 18.37 | 15.90 | 3.85% | $0.4 | $1.67 | 15.33% |
Fortinet Inc | 43.23 | 40.97 | 13.23 | 25.08% | $0.56 | $1.25 | 13.77% |
Gen Digital Inc | 29.79 | 8.39 | 4.87 | 6.43% | $0.53 | $0.81 | 4.77% |
Monday.Com Ltd | 291.18 | 13.59 | 14.79 | 2.57% | $0.01 | $0.25 | 30.12% |
CommVault Systems Inc | 99.49 | 22.89 | 7.59 | 10.11% | $0.03 | $0.23 | 23.17% |
Dolby Laboratories Inc | 29.09 | 2.87 | 5.67 | 3.61% | $0.14 | $0.33 | 1.38% |
Qualys Inc | 28.70 | 10.24 | 8.38 | 9.75% | $0.06 | $0.13 | 9.67% |
Teradata Corp | 15.74 | 13.43 | 1.27 | 30.24% | $0.09 | $0.25 | -10.11% |
Progress Software Corp | 38.05 | 4.71 | 2.53 | 3.85% | $0.08 | $0.19 | 35.57% |
N-able Inc | 101.25 | 1.98 | 3.25 | -0.93% | $0.01 | $0.09 | 3.91% |
Rapid7 Inc | 55.76 | 27.85 | 1.70 | 5.98% | $0.02 | $0.15 | 2.51% |
Average | 79.41 | 16.77 | 8.36 | 9.51% | $0.73 | $1.46 | 12.31% |
Through a detailed examination of Microsoft, we can deduce the following trends:
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With a Price to Earnings ratio of 39.09, which is 0.49x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
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The current Price to Book ratio of 11.68, which is 0.7x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
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The Price to Sales ratio of 13.99, which is 1.67x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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With a Return on Equity (ROE) of 8.27% that is 1.24% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
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The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $40.71 Billion, which is 55.77x above the industry average, implying stronger profitability and robust cash flow generation.
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With higher gross profit of $48.15 Billion, which indicates 32.98x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 13.27% exceeds the industry average of 12.31%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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 assessing Microsoft against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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When comparing the debt-to-equity ratio, Microsoft is in a stronger financial position compared to its top 4 peers.
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The company has a lower level of debt relative to its equity, indicating a more favorable balance between the two with a lower debt-to-equity ratio of 0.19.
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, outperforming industry peers and demonstrating solid financial health.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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