In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Microsoft (NASDAQ:MSFT) in relation to its major competitors in the Software industry. By closely examining key financial metrics, market standing, and growth prospects, our objective 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).
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Microsoft Corp | 36.52 | 10.91 | 13.07 | 8.27% | $40.71 | $48.15 | 13.27% |
| Oracle Corp | 41.40 | 29.56 | 9.03 | 19.27% | $5.89 | $9.94 | 6.4% |
| ServiceNow Inc | 136.27 | 20.52 | 18.29 | 4.66% | $0.72 | $2.44 | 18.63% |
| Palo Alto Networks Inc | 111.72 | 17.93 | 15.52 | 3.85% | $0.4 | $1.67 | 15.33% |
| Fortinet Inc | 41.98 | 39.78 | 12.85 | 25.08% | $0.56 | $1.25 | 13.77% |
| Gen Digital Inc | 28.58 | 8.05 | 4.67 | 6.43% | $0.53 | $0.81 | 4.77% |
| Monday.Com Ltd | 301.10 | 13.88 | 15.29 | 2.57% | $0.01 | $0.25 | 30.12% |
| CommVault Systems Inc | 112.08 | 25.55 | 8.55 | 10.11% | $0.03 | $0.23 | 23.17% |
| Dolby Laboratories Inc | 28.50 | 2.81 | 5.55 | 3.61% | $0.14 | $0.33 | 1.38% |
| Qualys Inc | 28.63 | 10.21 | 8.36 | 9.75% | $0.06 | $0.13 | 9.67% |
| Progress Software Corp | 49.68 | 6.29 | 3.48 | 2.51% | $0.07 | $0.19 | 28.88% |
| Teradata Corp | 15.74 | 13.43 | 1.27 | 30.24% | $0.09 | $0.25 | -10.11% |
| Rapid7 Inc | 58.56 | 29.26 | 1.78 | 5.98% | $0.02 | $0.15 | 2.51% |
| N-able Inc | 101.88 | 1.99 | 3.27 | -0.93% | $0.01 | $0.09 | 3.91% |
| Average | 81.24 | 16.87 | 8.3 | 9.47% | $0.66 | $1.36 | 11.42% |
After examining Microsoft, the following trends can be inferred:
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The stock's Price to Earnings ratio of 36.52 is lower than the industry average by 0.45x, suggesting potential value in the eyes of market participants.
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Considering a Price to Book ratio of 10.91, which is well below the industry average by 0.65x, the stock may be undervalued based on its book value compared to its peers.
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With a relatively high Price to Sales ratio of 13.07, which is 1.57x the industry average, the stock might be considered overvalued based on sales performance.
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With a Return on Equity (ROE) of 8.27% that is 1.2% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
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Compared to its industry, 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.
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With higher gross profit of $48.15 Billion, which indicates 35.4x 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% is notably higher compared to the industry average of 11.42%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.
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:
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Among its top 4 peers, Microsoft has a stronger financial position with a lower debt-to-equity ratio of 0.19.
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This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
For Microsoft in the Software industry, the PE and PB ratios suggest that the stock is undervalued compared to its peers. However, the high PS ratio indicates that the market values its sales more highly. In terms of ROE, Microsoft's performance is weaker than its peers, while its high EBITDA and gross profit margins indicate strong operational efficiency. Additionally, the high revenue growth rate reflects a positive outlook for the company's future prospects.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Latest Ratings for MSFT
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Jun 2025 | Citigroup | Maintains | Buy | Buy |
| May 2025 | RBC Capital | Reiterates | Outperform | Outperform |
| May 2025 | Evercore ISI Group | Maintains | Outperform | Outperform |
View More Analyst Ratings for MSFT
View the Latest Analyst Ratings
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