Better Bet Than Microsoft Stock: Pay Less To Get More From Industry Peers
As Microsoft continues to solidify its position as a leader in the Systems Software industry, a closer examination reveals intriguing comparisons with peers XYZ and GEN. While Microsoft boasts a higher valuation based on its price-to-EBIT ratio, both competitors demonstrate superior revenue and operating income growth. This disconnect raises questions for investors about whether opportunities lie beyond Microsoft, making XYZ and GEN compelling alternatives worthy of exploration.
Key Metrics Compared
| Metric | MSFT | XYZ | GEN |
|---|---|---|---|
| P/EBIT* | 30.6x | 28.4x | 11.5x |
| LTM OpInc Growth | 15.5% | 162.0% | 38.8% |
| 3Y Avg OpInc Growth | 14.6% | 128.6% | 17.8% |
| LTM Revenue Growth | 14.1% | 4.6% | 3.6% |
| 3Y Avg Revenue Growth | 12.0% | 13.3% | 12.2% |
Uncover more peer insights on Microsoft peer comparison and Microsoft counter-intuitive comparison
OpInc = Operating Income, P/EBIT = Price To Operating Income Ratio
Is The Mismatch In Stock Price Temporary
One way to check if Microsoft stock is expensive now versus the other tickers would be to see how these metrics compared across companies exactly a year ago. Specifically, if there has been a marked reversal in the trend for Microsoft in the last 12 months, then there is a chance that the current mismatch is likely to reverse. On the other hand, a persistent underperformance in revenue and operating income growth for Microsoft would reinforce the conclusion that the stock is expensive compared to its peers, but may not revert soon
Key Metrics Compared 1 Yr Prior
| Metric | MSFT | XYZ | GEN |
|---|---|---|---|
| P/EBIT* | 32.0x | 59.0x | 12.6x |
| LTM OpInc Growth | 17.1% | 341.7% | 47.0% |
| 3Y Avg OpInc Growth | 14.6% | 578.3% | 13.4% |
| LTM Revenue Growth | 15.0% | 10.1% | 3.4% |
| 3Y Avg Revenue Growth | 12.3% | 11.4% | 12.5% |
OpInc = Operating Income
Additional Metrics To Consider
| Metric | MSFT | XYZ | GEN |
|---|---|---|---|
| P/S | 13.7x | 1.8x | 4.7x |
| Market Cap (Current) | $ 3.69 Tril | $ 42.02 Bil | $ 18.38 Bil |
| LTM Revenue | $ 270.01 Bil | $ 23.94 Bil | $ 3.94 Bil |
| LTM Opinc | $ 122.13 Bil | $ 1.77 Bil | $ 1.62 Bil |
| LTM Op Margin | 45.2% | 7.4% | 41.2% |
OpInc = Operating Income
Overview of Returns:
Individual Stock Returns YTD:
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | Total [1] | Avg | Best | |
|---|---|---|---|---|---|---|---|---|---|
| Returns | |||||||||
| MSFT Return | 43% | 52% | -28% | 58% | 13% | 19% | 231% | <=== | |
| XYZ Return | 248% | -26% | -61% | 23% | 10% | -18% | 11% | ||
| GEN Return | 44% | 28% | -16% | 9% | 22% | 11% | 130% | ||
| S&P 500 Return | 16% | 27% | -19% | 24% | 23% | 6% | 94% | ||
| Monthly Win Rates [3] | |||||||||
| MSFT Win Rate | 67% | 75% | 25% | 67% | 58% | 50% | 57% | ||
| XYZ Win Rate | 83% | 50% | 42% | 42% | 58% | 67% | 57% | ||
| GEN Win Rate | 58% | 58% | 42% | 67% | 75% | 50% | 58% | ||
| S&P 500 Win Rate | 58% | 75% | 42% | 67% | 75% | 50% | 61% | <=== | |
| Max Drawdowns [4] | |||||||||
| MSFT Max Drawdown | -14% | -5% | -36% | -7% | -2% | -16% | -13% | ||
| XYZ Max Drawdown | -39% | -27% | -68% | -38% | -26% | -45% | -41% | ||
| GEN Max Drawdown | 0% | -6% | -21% | -27% | -13% | -14% | -14% | ||
| S&P 500 Max Drawdown | -31% | -1% | -25% | -1% | -2% | -15% | -12% | <=== | |
[1] Cumulative total returns since the beginning of 2020
[2] 2025 data is for the year till date (YTD)
[3] Win Rate = % of calendar months in which monthly returns were positive
[4] Max drawdown represents maximum peak-to-trough decline within a year
Alternate buying based on valuation, while attractive, needs to be evaluated carefully from multiple angles. Such multi-factor analysis is exactly how we construct Trefis portfolio strategies. If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.