uploads///msft mkt cao

Microsoft’s Value Proposition in the US Software Space

By

Apr. 14 2016, Updated 11:06 a.m. ET

Microsoft’s scale in the systems software space

Earlier in this series, we discussed some recent updates of Microsoft (MSFT). Now, let’s look at the value proposition of the company among select software companies in the United States. Let’s start with Microsoft’s size.

As of April 6, 2016, and as the below chart shows, Microsoft was the largest software player by market capitalization on a global scale. It was followed by Oracle (ORCL). Red Hat (RHT), ServiceNow (NOW), and Tableau Software are among the leading players in the systems software space.

Article continues below advertisement

Enterprise value multiples of Microsoft

Now let’s look at Microsoft’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple and those of select software players in the United States.

Microsoft was trading at a forward EV-to-EBITDA multiple of ~10.10x on April 6, 2016. This metric was lower than Red Hat’s EV-to-EBITDA multiple of ~16.63x. The same metric for Oracle (ORCL) was ~9.05x as of April 6.

Microsoft’s dividend yield

Now, let’s look at Microsoft’s dividend yield along with those of select US software companies. The company’s forward annual dividend yield was ~2.64% as of April 6. This was higher than Oracle’s forward dividend yield of~1.48% as of April 6. Red Hat and ServiceNow do not pay dividends.

For diversified exposure to companies in the US telecom space, you may consider investing in the Technology Select Sector SPDR ETF (XLK). XLK has ~38% exposure toward the application software space.

Advertisement

More From Market Realist

  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.