Microsoft Corporation (MSFT)vs AVGO Holdings, Inc. (AVGO)

Quick verdict

Microsoft Corporation (MSFT) and AVGO Holdings, Inc. (AVGO) appeal to different investors. On our six-factor framework, MSFT scores 2 and AVGO scores 4. AVGO looks cheaper on the multiples that matter, while AVGO grows faster and MSFT earns higher returns on capital. Overall, AVGO edges this comparison, but the right pick depends on whether you prioritise value, growth, income or balance-sheet safety.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Microsoft Corporation operates in Software—Infrastructure (Technology), while AVGO Holdings, Inc. sits in Credit Services (Financial Services). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. MSFT carries a beta of 1.27 versus 1.30 for AVGO, meaning AVGO has historically been the more volatile of the two.

Valuation

On valuation, AVGO is the cheaper stock. MSFT trades on a forward P/E of 16.83 and EV/EBITDA of 36.41, against 17.33 and 17.22 for AVGO. Price-to-sales is 15.59 vs 9.76, and free-cash-flow yield is 5.6% vs 4.6%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

AVGO is the faster grower. MSFT has compounded revenue at 13.4% over three years with EPS growth of 12.8%, while AVGO has delivered 20.9% revenue and 29.3% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, MSFT is stronger. MSFT posts a 18.8% operating margin, 47.0% return on equity and 31.5% return on invested capital. AVGO posts 35.1%, 23.1% and 8.1% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

MSFT has the safer balance sheet. MSFT carries net-debt/EBITDA of 1.00x with a current ratio of 1.35, versus 3.11x and 0.83 for AVGO. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year MSFT returned -13.8% against 95.6% for AVGO; on a three-year annualised basis it is 4.7% vs 19.0%. MSFT yields 0.0% and AVGO yields 0.0%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, AVGO is the better fit on today's multiples. Growth investors will likely prefer AVGO, which is expanding faster. Income investors should lean toward AVGO for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour MSFT for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: AVGO
• Growth: AVGO
• Income: AVGO
• Quality: MSFT

Frequently asked questions

Is MSFT or AVGO the better buy right now?

Neither is universally "better." MSFT scores 2 and AVGO scores 4 on our six-factor framework. AVGO is cheaper, AVGO grows faster, and MSFT is higher quality — so the right pick depends on your objective.

Which stock is cheaper, MSFT or AVGO?

AVGO is the cheaper stock across forward P/E (16.83 vs 17.33), EV/EBITDA (36.41 vs 17.22) and price-to-sales (15.59 vs 9.76).

Which has grown faster, MSFT or AVGO?

AVGO has the stronger growth profile, with three-year revenue CAGR of 13.4% for MSFT versus 20.9% for AVGO.

Which stock pays a bigger dividend?

MSFT yields 0.0% and AVGO yields 0.0%, so AVGO is the stronger income choice.

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