Evaluating Microsoft Against Peers In Software Industry

Comments
Loading...

Amidst the fast-paced and highly competitive business environment of today, conducting comprehensive company analysis is essential for investors and industry enthusiasts. In this article, we will delve into an extensive industry comparison, evaluating Microsoft MSFT in comparison to its major competitors within the Software industry. By analyzing critical 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 32.91 10.03 11.66 8.17% $36.79 $47.83 12.27%
Oracle Corp 42.58 35.44 9.01 25.66% $5.75 $9.97 8.64%
ServiceNow Inc 144.24 21.20 18.72 4.06% $0.62 $2.33 21.34%
Palo Alto Networks Inc 113.33 20.59 16.54 6.33% $0.45 $1.58 13.88%
CrowdStrike Holdings Inc 885.76 36.39 30.20 -0.57% $0.05 $0.76 28.52%
Fortinet Inc 49.40 57.28 14.47 90.26% $0.66 $1.24 13.0%
Gen Digital Inc 27.18 7.94 4.46 7.48% $0.45 $0.79 4.01%
Monday.Com Ltd 513.71 15.41 17.18 -1.28% $-0.02 $0.23 32.67%
CommVault Systems Inc 48.66 28.26 8.86 3.9% $0.02 $0.21 21.13%
Dolby Laboratories Inc 31.02 3.22 6.19 2.72% $0.11 $0.32 13.13%
QXO Inc 23.09 1.19 21.04 -0.21% $-0.03 $0.01 -2.0%
Qualys Inc 30.92 11.03 8.84 10.53% $0.05 $0.13 8.36%
SolarWinds Corp 28.59 2.24 4.01 0.94% $0.07 $0.18 5.5%
Progress Software Corp 37.22 5.67 3.38 0.27% $0.05 $0.18 21.47%
Teradata Corp 21.38 17.84 1.39 32.0% $0.08 $0.27 0.46%
Average 142.65 18.84 11.73 13.01% $0.59 $1.3 13.58%

When conducting a detailed analysis of Microsoft, the following trends become clear:

  • With a Price to Earnings ratio of 32.91, which is 0.23x 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 10.03, significantly falling below the industry average by 0.53x, it suggests undervaluation and the possibility of untapped growth prospects.

  • With a relatively low Price to Sales ratio of 11.66, which is 0.99x the industry average, the stock might be considered undervalued based on sales performance.

  • The company has a lower Return on Equity (ROE) of 8.17%, which is 4.84% 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 $36.79 Billion, which is 62.36x above the industry average, indicating stronger profitability and robust cash flow generation.

  • Compared to its industry, the company has higher gross profit of $47.83 Billion, which indicates 36.79x above the industry average, indicating stronger profitability and higher earnings from its core operations.

  • The company is witnessing a substantial decline in revenue growth, with a rate of 12.27% compared to the industry average of 13.58%, which indicates a challenging sales environment.

Debt To Equity Ratio

debt to equity

The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative to its equity.

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.

By considering the Debt-to-Equity ratio, Microsoft can be compared to its top 4 peers, leading to the following observations:

  • 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 0.21, which can be perceived as a positive aspect by investors.

Key Takeaways

For Microsoft in the Software industry, the PE, PB, and PS ratios are all low compared to peers, indicating potential undervaluation. However, the low ROE suggests lower profitability relative to industry peers. On the other hand, Microsoft's high EBITDA and gross profit signify strong operational performance. The low revenue growth may be a concern for future prospects compared to industry peers.

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

Overview Rating:
Speculative
50%
Technicals Analysis
66
0100
Financials Analysis
40
0100
Overview
Market News and Data brought to you by Benzinga APIs

Posted In: