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Understanding Microsoft's Position In Software Industry Compared To Competitors
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Understanding Microsoft's Position In Software Industry Compared To Competitors
Jan 24, 2025 7:31 AM

In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Microsoft ( MSFT ) in relation to its major competitors in the Software industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate company's performance in the industry.

Microsoft Background

Microsoft ( MSFT ) 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 ( MSFT ), 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 ( MSFT ) 36.89 11.54 13.13 8.87% $38.23 $45.49 16.04%
Oracle Corp 45.59 37.94 9.65 25.66% $5.75 $9.97 8.64%
ServiceNow Inc 176.67 25.19 22.51 4.81% $0.67 $2.21 22.25%
Palo Alto Networks Inc 48.59 20.79 16.05 6.33% $0.45 $1.58 13.88%
CrowdStrike Holdings Inc 740.59 30.42 25.25 -0.57% $0.05 $0.76 28.52%
Fortinet Inc 48.97 82.25 13.16 90.26% $0.66 $1.24 13.0%
Gen Digital Inc 27.77 8.08 4.50 7.92% $0.51 $0.78 3.07%
Monday.Com Ltd 578.84 12.78 14.11 -1.28% $-0.02 $0.23 32.67%
Dolby Laboratories Inc 29.90 3.10 6.15 2.39% $0.07 $0.27 4.9%
CommVault Systems Inc 40.85 25.33 8.09 5.56% $0.02 $0.19 16.06%
QXO Inc 24.53 1.26 22.35 -0.21% $-0.03 $0.01 -2.0%
Qualys Inc 31.33 11.55 8.99 10.53% $0.05 $0.13 8.36%
Teradata Corp 37.85 24.63 1.77 32.0% $0.08 $0.27 0.46%
SolarWinds Corp 66.59 1.83 3.20 0.94% $0.07 $0.18 5.5%
Progress Software Corp 35.14 5.35 3.19 0.27% $0.05 $0.18 21.47%
Average 138.09 20.75 11.36 13.19% $0.6 $1.29 12.63%

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By analyzing Microsoft ( MSFT ), we can infer the following trends:

With a Price to Earnings ratio of 36.89, which is 0.27x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.

The current Price to Book ratio of 11.54, which is 0.56x the industry average, is substantially lower than the industry average, indicating potential undervaluation.

With a relatively high Price to Sales ratio of 13.13, which is 1.16x the industry average, the stock might be considered overvalued based on sales performance.

With a Return on Equity (ROE) of 8.87% that is 4.32% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.

With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $38.23 Billion, which is 63.72x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.

The company has higher gross profit of $45.49 Billion, which indicates 35.26x above the industry average, indicating stronger profitability and higher earnings from its core operations.

The company's revenue growth of 16.04% exceeds the industry average of 12.63%, indicating strong sales performance and market outperformance.

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 examining Microsoft ( MSFT ) in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:

Microsoft ( MSFT ) has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.21.

This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator by investors.

Key Takeaways

The low PE and PB ratios suggest that Microsoft ( MSFT ) is undervalued compared to its peers in the Software industry. However, the high PS ratio indicates that the market values Microsoft's ( MSFT ) revenue more highly. In terms of profitability, Microsoft's ( MSFT ) low ROE may be a concern, despite its high EBITDA and gross profit margins. The high revenue growth rate reflects positively on Microsoft's ( MSFT ) future prospects within the industry.

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

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