Infosys vs Microsoft Which Is a Smarter Choice?

Infosys and Microsoft are two of the biggest technology companies in the world, each with a strong presence in the global market. While Microsoft is known for its dominance in software and cloud services, Infosys focuses on providing IT consulting and outsourcing services. Investors often compare the performance of these two stocks to make informed decisions about their portfolios. Both companies have seen significant growth in recent years, but their stocks have different characteristics that appeal to different types of investors.

Infosys or Microsoft?

When comparing Infosys 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 Infosys 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. Infosys has a dividend yield of 2.66%, while Microsoft has a dividend yield of 0.71%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Infosys reports a 5-year dividend growth of -5.23% year and a payout ratio of 70.73%. 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 Infosys P/E ratio at 28.25 and Microsoft's P/E ratio at 34.92. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Infosys P/B ratio is 8.46 while Microsoft's P/B ratio is 10.98.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Infosys has seen a 5-year revenue growth of 0.65%, while Microsoft's is 0.99%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Infosys's ROE at 31.58% and Microsoft's ROE at 34.56%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $21.80 for Infosys and $418.21 for Microsoft. Over the past year, Infosys's prices ranged from $16.04 to $23.48, with a yearly change of 46.38%. Microsoft's prices fluctuated between $362.90 and $468.35, with a yearly change of 29.06%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.