Performance Comparison: Microsoft And Competitors In Software Industry

In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating Microsoft MSFT vis-à-vis its key competitors in the Software industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal 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).

Through a meticulous analysis of Microsoft, we can observe the following trends:

• At 35.28, the stock's Price to Earnings ratio is 0.32x less than the industry average, suggesting favorable growth potential.

• Considering a Price to Book ratio of 11.53, which is well below the industry average by 0.33x, the stock may be undervalued based on its book value compared to its peers.

• With a relatively high Price to Sales ratio of 12.69, which is 1.22x the industry average, the stock might be considered overvalued based on sales performance.

• The Return on Equity (ROE) of 8.45% is 40.85% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.

• The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $34.33 Billion, which is 57.22x above the industry average, indicating stronger profitability and robust cash flow generation.

• With higher gross profit of $45.04 Billion, which indicates 34.38x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.

• With a revenue growth of 15.2%, which surpasses the industry average of 11.4%, 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.

When evaluating Microsoft alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:

• 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 0.25.

• 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 company is undervalued compared to its peers. However, the high PS ratio indicates that the market values Microsoft's sales more highly. In terms of ROE, EBITDA, gross profit, and revenue growth, Microsoft shows strong performance with high profitability and revenue growth compared to its industry peers.

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