Microsoft vs Alphabet Which Performs Better?

Microsoft and Alphabet, two tech giants that dominate the market with their innovative products and services, are often compared when looking at investment opportunities. Microsoft, known for its software and cloud computing services, has shown steady growth over the years. On the other hand, Alphabet, the parent company of Google, is renowned for its search engine dominance and diverse portfolio of businesses. Investors often debate which stock is a better investment option, weighing the strengths and weaknesses of each company.

Microsoft or Alphabet?

When comparing Microsoft and Alphabet, 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 Microsoft and Alphabet.

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. Microsoft has a dividend yield of 0.69%, while Alphabet has a dividend yield of 0.32%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Microsoft reports a 5-year dividend growth of 10.16% year and a payout ratio of 24.63%. On the other hand, Alphabet reports a 5-year dividend growth of 0.00% year and a payout ratio of 5.22%.

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 Microsoft P/E ratio at 36.73 and Alphabet's P/E ratio at 24.75. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Microsoft P/B ratio is 11.55 while Alphabet's P/B ratio is 7.43.

Growth Investors:

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

Retail Investors:

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