Alphabet vs Microsoft Which Is a Better Investment?

Alphabet Inc. and Microsoft Corporation are two tech giants that have consistently shown strong performance in the stock market. Alphabet, the parent company of Google, has dominated the search engine and online advertising space, while Microsoft has excelled in software development and cloud computing. Both companies have shown impressive growth and profitability, making them attractive options for investors seeking stability and potential for long-term gains. In this comparison, we will analyze the strengths and weaknesses of Alphabet and Microsoft stocks to help investors make informed decisions.

Alphabet or Microsoft?

When comparing Alphabet and Microsoft, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Alphabet and Microsoft.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Alphabet has a dividend yield of 0.32%, while Microsoft has a dividend yield of 0.69%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Alphabet reports a 5-year dividend growth of 0.00% year and a payout ratio of 5.22%. On the other hand, Microsoft reports a 5-year dividend growth of 10.16% year and a payout ratio of 24.63%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Alphabet P/E ratio at 24.75 and Microsoft's P/E ratio at 36.73. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Alphabet P/B ratio is 7.43 while Microsoft's P/B ratio is 11.55.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Alphabet has seen a 5-year revenue growth of 1.47%, while Microsoft's is 0.99%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Alphabet's ROE at 31.66% and Microsoft's ROE at 34.56%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $191.26 for Alphabet and $445.58 for Microsoft. Over the past year, Alphabet's prices ranged from $131.55 to $196.89, with a yearly change of 49.67%. Microsoft's prices fluctuated between $366.28 and $468.35, with a yearly change of 27.87%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.