Contrasting Microsoft (MSFT) and Dropbox (NASDAQ:DBX)

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Dropbox (NASDAQ:DBX) and Microsoft (NASDAQ:MSFT) are both computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, risk, earnings, dividends, analyst recommendations, institutional ownership and valuation.

Profitability

This table compares Dropbox and Microsoft’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dropbox -38.83% -158.23% -35.41%
Microsoft 16.38% 39.86% 12.78%

Dividends

Microsoft pays an annual dividend of $1.84 per share and has a dividend yield of 1.7%. Dropbox does not pay a dividend. Microsoft pays out 47.4% of its earnings in the form of a dividend. Microsoft has increased its dividend for 15 consecutive years.

Insider and Institutional Ownership

21.6% of Dropbox shares are owned by institutional investors. Comparatively, 71.6% of Microsoft shares are owned by institutional investors. 1.4% of Microsoft shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Dropbox and Microsoft, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dropbox 0 4 11 0 2.73
Microsoft 1 1 29 1 2.94

Dropbox presently has a consensus price target of $34.31, suggesting a potential upside of 45.43%. Microsoft has a consensus price target of $122.29, suggesting a potential upside of 13.53%. Given Dropbox’s higher possible upside, research analysts plainly believe Dropbox is more favorable than Microsoft.

Valuation & Earnings

This table compares Dropbox and Microsoft’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dropbox $1.11 billion 8.66 -$111.70 million N/A N/A
Microsoft $110.36 billion 7.51 $16.57 billion $3.88 27.76

Microsoft has higher revenue and earnings than Dropbox.

Summary

Microsoft beats Dropbox on 12 of the 15 factors compared between the two stocks.

Dropbox Company Profile

Dropbox Inc. provides a collaboration platform worldwide. Its platform allows individuals, teams, and organizations to create, access, and share content online. The company was formerly known as Evenflow, Inc. and changed its name to Dropbox, Inc. in October 2009. Dropbox Inc. has strategic partnership with Zoom Video Communications, Inc. Dropbox Inc. was founded in 2007 and is headquartered in San Francisco, California.

Microsoft Company Profile

Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. Its company’s Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, such as Office, Exchange, SharePoint, Skype for Business, Microsoft Teams, and related Client Access Licenses (CALs); Office 365 consumer services, including Skype, Outlook.com, and OneDrive; LinkedIn online professional network; and Dynamics business solutions comprising financial management, enterprise resource planning, customer relationship management, supply chain management, and analytics applications for small and medium businesses, large organizations, and divisions of enterprises. The company’s Intelligent Cloud segment licenses server products and cloud services, such as SQL Server, Windows Server, Visual Studio, System Center, and related CALs, as well as Azure, a cloud platform; enterprise services, including premier support and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions, as well as providing training and certification to developers and IT professionals on Microsoft products. Its More Personal Computing segment offers Windows OEM, volume, and other non-volume licensing of the Windows operating system; patent licensing, Windows Internet of Things, and MSN display advertising; devices comprising Surface, PC accessories, and other intelligent devices; Xbox hardware and software and services; and Bing and Bing Ads search advertising. The company markets and distributes its products through original equipment manufacturers, distributors, and resellers, as well as through online and Microsoft retail stores. Microsoft Corporation has collaboration with E.ON; a strategic alliance with Nielsen Holdings plc; and a strategic collaboration with Mastercard Incorporated. The company was founded in 1975 and is headquartered in Redmond, Washington.

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