Oracle Corporation Valuation – January 2019 $ORCL

Company Profile (excerpt from Reuters): Oracle Corporation (Oracle), incorporated on October 9, 2005, provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $178,674,331,867 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.80 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 22.73% Fail
6. Moderate PEmg Ratio PEmg < 20 24.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.12 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.05
MG Growth Estimate -1.01%
MG Value $13.29
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $29.71
MG Value based on 0% Growth $17.41
Market Implied Growth Rate 7.91%
Current Price $49.81
% of Intrinsic Value 374.79%

Oracle Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.2 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Oracle Corporation revealed the company was trading above its Graham Number of $26.99. The company pays a dividend of $0.76 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 24.31, which was below the industry average of 50.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.94.

Oracle Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.94
Graham Number $26.99
PEmg 24.31
Current Ratio 2.80
PB Ratio 6.12
Current Dividend $0.76
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $56,938,000,000
Total Current Liabilities $20,315,000,000
Long-Term Debt $51,561,000,000
Total Assets $118,318,000,000
Intangible Assets $49,881,000,000
Total Liabilities $87,263,000,000
Shares Outstanding (Diluted Average) 3,817,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.83
May2018 $0.90
May2017 $2.21
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.05
May2018 $1.76
May2017 $2.20
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Oracle Corporation Valuation – March 2018 $ORCL
9 Best Stocks For Value Investors This Week – 7/23/16
Oracle Corporation Valuation – July 2016 $ORCL
19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL

Other ModernGraham posts about related companies

Red Hat Inc Valuation – January 2019 $RHT
Alphabet Inc Valuation – January 2019 $GOOG $GOOGL
Ansys Inc Valuation – January 2019 $ANSS
Citrix Systems Inc Valuation – January 2019 $CTXS
Microsoft Corporation Valuation – November 2018 $MSFT
Cisco Systems Inc Valuation – November 2018 $CSCO
Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Valuation – March 2018 $ORCL

Company Profile (excerpt from Reuters): Oracle Corporation (Oracle), incorporated on October 9, 2005, provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

ORCL Chart

ORCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $186,765,780,359 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 32.24% Fail
6. Moderate PEmg Ratio PEmg < 20 25.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.95 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.94 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.78
MG Growth Estimate -2.23%
MG Value $7.18
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $25.81
MG Value based on 0% Growth $15.13
Market Implied Growth Rate 8.60%
Current Price $45.75
% of Intrinsic Value 637.15%

Oracle Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.09 in 2014 to an estimated $1.78 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.6% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Oracle Corporation revealed the company was trading above its Graham Number of $16.86. The company pays a dividend of $0.64 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.7, which was below the industry average of 50.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.08.

Oracle Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.08
Graham Number $16.86
PEmg 25.70
Current Ratio 4.33
PB Ratio 3.95
Current Dividend $0.64
Dividend Yield 1.40%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 2/1/2018
Total Current Assets $77,732,000,000
Total Current Liabilities $17,968,000,000
Long-Term Debt $56,224,000,000
Total Assets $138,201,000,000
Intangible Assets $49,365,000,000
Total Liabilities $90,412,000,000
Shares Outstanding (Diluted Average) 4,122,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.97
May2017 $2.21
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22
May1998 $0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.78
May2017 $2.20
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49
May2002 $0.50

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL
13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015

Other ModernGraham posts about related companies

CA Inc Valuation – March 2018 $CA
Red Hat Inc Valuation – March 2018 $RHT
Alphabet Inc Valuation – March 2018 $GOOGL
Ansys Inc Valuation – March 2018 $ANSS
Citrix Systems Inc Valuation – February 2018 $CTXS
Microsoft Corp Valuation – February 2018 $MSFT
Cisco Systems Inc Valuation – February 2018 $CSCO
Symantec Corp Valuation – August 2017 $SYMC
Intuit Inc Valuation – March 2017 $INTU
CommVault Systems Inc Valuation – Initial Coverage $CVLT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Valuation – July 2016 $ORCL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. The Company’s services business includes the remainder of the Company’s segments. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $172,619,664,184 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.74 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.55% Pass
6. Moderate PEmg Ratio PEmg < 20 17.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.80 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.85 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value chart July 2016

EPSmg $2.35
MG Growth Estimate 4.11%
MG Value $39.25
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $34.06
MG Value based on 0% Growth $19.96
Market Implied Growth Rate 4.64%
Current Price $41.77
% of Intrinsic Value 106.43%

Oracle Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.84 in 2013 to an estimated $2.35 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 4.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Oracle Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

ORCL charts July 2016

Net Current Asset Value (NCAV) -$0.13
Graham Number $26.17
PEmg 17.78
Current Ratio 3.74
PB Ratio 3.80
Current Dividend $0.60
Dividend Yield 1.44%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 5/1/2016
Total Current Assets $64,313,000,000
Total Current Liabilities $17,208,000,000
Long-Term Debt $40,105,000,000
Total Assets $112,180,000,000
Intangible Assets $39,533,000,000
Total Liabilities $64,891,000,000
Shares Outstanding (Diluted Average) 4,305,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.66
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22
May1998 $0.14
May1997 $0.14

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.35
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49
May2002 $0.50
May2001 $0.50

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL
13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015

Other ModernGraham posts about related companies

CA Inc Valuation – July 2016 $CA
Red Hat Inc Valuation – June 2016 $RHT
Yahoo! Inc Valuation – June 2016 $YHOO
Alphabet Inc Valuation – June 2016 $GOOGL
Ansys Inc Valuation – June 2016 $ANSS
Citrix Systems Inc Valuation – May 2016 $CTXS
Symantec Corp Valuation – February 2016 $SYMC
Microsoft Corp Valuation – February 2016 $MSFT
Cisco Systems Inc Valuation – February 2016 $CSCO
CA Inc Valuation – January 2016 Update $CA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Valuation – January 2016 Update $ORCL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) is a provider of enterprise software and computer hardware products, and services. The Company’s offerings include Oracle database and middleware software, application software, cloud infrastructure, hardware systems including computer server, storage and networking products, and related services. It operates through various segments, including new software licenses and cloud software subscriptions, which include software licenses and Oracle Cloud offerings; cloud infrastructure-as-a-service, which provides deployment and management offerings; software license updates and product support, which includes support, enhancements and upgrades for Oracle software products; hardware systems products, which includes servers, storage, networking, virtualization software, operating systems and management software; hardware systems support, which provides software updates for software components, and services business, which offers consulting services

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $149,731,500,017 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.26 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 132.43% Pass
6. Moderate PEmg Ratio PEmg < 20 15.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.37 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.89 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value Chart January 2016

EPSmg $2.26
MG Growth Estimate 6.78%
MG Value $49.89
Opinion Undervalued
MG Value based on 3% Growth $32.78
MG Value based on 0% Growth $19.22
Market Implied Growth Rate 3.68%
Current Price $35.86
% of Intrinsic Value 71.88%

Oracle Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history as well as the high PB ratio.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.26 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.68% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Oracle Corporation (ORCL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

ORCL Charts January 2016

Net Current Asset Value (NCAV) -$0.45
Graham Number $23.71
PEmg 15.86
Current Ratio 4.26
PB Ratio 3.37
Dividend Yield 1.59%
Number of Consecutive Years of Dividend Growth 3

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Nov15
Total Current Assets $58,618,000,000
Total Current Liabilities $13,754,000,000
Long-Term Debt $39,940,000,000
Total Assets $106,483,000,000
Intangible Assets $39,770,000,000
Total Liabilities $60,559,000,000
Shares Outstanding (Diluted Average) 4,316,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.29
May15 $2.21
May14 $2.38
May13 $2.26
May12 $1.96
May11 $1.67
May10 $1.21
May09 $1.09
May08 $1.06
May07 $0.81
May06 $0.64
May05 $0.55
May04 $0.50
May03 $0.43
May02 $0.39
May01 $0.44
May00 $1.05
May99 $0.22
May98 $0.14
May97 $0.14
May96 $0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.26
May15 $2.20
May14 $2.09
May13 $1.84
May12 $1.56
May11 $1.29
May10 $1.06
May09 $0.93
May08 $0.80
May07 $0.65
May06 $0.54
May05 $0.48
May04 $0.49
May03 $0.49
May02 $0.50
May01 $0.50
May00 $0.46

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15
Oracle Corporation Analysis – July 2015 Update $ORCL

Other ModernGraham posts about related companies

Ansys Inc. Valuation – November 2015 Update $ANSS
Yahoo! Inc. Valuation – November 2015 Update $YHOO
Microsoft Corporation Valuation – November 2015 Update $MSFT
Cisco Systems Inc. Valuation – November 2015 Update $CSCO
Alphabet Inc. Valuation – October 2015 Update $GOOG $GOOGL
Intuit Inc. Analysis – October 2015 Update $INTU
Oracle Corporation Analysis – October 2015 Update $ORCL
CA Inc. Analysis – August 2015 Update $CA
The Best Companies of the Software Industry – August 2015
Ansys Inc. Analysis – Initial Coverage $ANSS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Analysis – October 2015 Update $ORCL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) is a provider of enterprise software and computer hardware products, and services. The Company’s offerings include Oracle database and middleware software, application software, cloud infrastructure, hardware systems including computer server, storage and networking products, and related services. It operates through various segments, including new software licenses and cloud software subscriptions, which include software licenses and Oracle Cloud offerings; cloud infrastructure-as-a-service, which provides deployment and management offerings; software license updates and product support, which includes support, enhancements and upgrades for Oracle software products; hardware systems products, which includes servers, storage, networking, virtualization software, operating systems and management software; hardware systems support, which provides software updates for software components, and services business, which offers consulting services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $154,963,039,752 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.04 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 139.19% Pass
6. Moderate PEmg Ratio PEmg < 20 15.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.45 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.04 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.86 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value chart October 2015

EPSmg $2.33
MG Growth Estimate 7.43%
MG Value $54.35
Opinion Undervalued
MG Value based on 3% Growth $33.75
MG Value based on 0% Growth $19.78
Market Implied Growth Rate 3.67%
Current Price $36.87
% of Intrinsic Value 67.84%

Oracle Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history and the high PB ratio.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.33 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.67% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Oracle Corporation (ORCL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

ORCL charts October 2015

Net Current Asset Value (NCAV) -$0.11
Graham Number $24.82
PEmg 15.84
Current Ratio 4.04
PB Ratio 3.45
Dividend Yield 1.46%
Number of Consecutive Years of Dividend Growth 3

 

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Most Recent Balance Sheet Figures

Total Current Assets $62,122,000,000
Total Current Liabilities $15,391,000,000
Long-Term Debt $40,050,000,000
Total Assets $109,706,000,000
Intangible Assets $40,088,000,000
Total Liabilities $62,609,000,000
Shares Outstanding (Diluted Average) 4,412,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.49
May15 $2.21
May14 $2.38
May13 $2.26
May12 $1.96
May11 $1.67
May10 $1.21
May09 $1.09
May08 $1.06
May07 $0.81
May06 $0.64
May05 $0.55
May04 $0.50
May03 $0.43
May02 $0.39
May01 $0.44
May00 $1.05
May99 $0.22
May98 $0.14
May97 $0.14
May96 $0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.33
May15 $2.20
May14 $2.09
May13 $1.84
May12 $1.56
May11 $1.29
May10 $1.06
May09 $0.93
May08 $0.80
May07 $0.65
May06 $0.54
May05 $0.48
May04 $0.49
May03 $0.49
May02 $0.50
May01 $0.50
May00 $0.46

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Software Industry – August 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15
Oracle Corporation Analysis – July 2015 Update $ORCL
24 Companies in the Spotlight This Week – 3/28/15
Oracle Corporation Quarterly Valuation – March 2015 $ORCL

Other ModernGraham posts about related companies

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The Best Companies of the Software Industry – August 2015
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Microsoft Corporation Analysis – August 2015 Update $MSFT
Cisco Systems Inc. Analysis – August 2015 Update $CSCO
Google Inc. Analysis – July 2015 Update $GOOGL
Intuit Inc. Analysis – July 2015 Update $INTU
Oracle Corporation Analysis – July 2015 Update $ORCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Analysis – July 2015 Update $ORCL

500px-Oracle_logo.svg

Oracle Corporation passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the lack of dividends, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.29 in 2011 to $2.20 for 2015. This level of demonstrated growth outpaces the market’s implied estimate for annual earnings growth of 4.95% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 14% annually. The ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, but still returns an estimate of intrinsic value well above the current price, indicating that Oracle Corporation is undervalued at the present time.

Read the full valuation on Guru Focus!


Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Oracle Corporation Quarterly Valuation – March 2015 $ORCL

500px-Oracle_logo.svg

Oracle Corporation performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short dividend history and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.29 in 2011 to an estimated $2.26 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 5.25% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Oracle Corporation (ORCL) for a greater perspective!

Read the full valuation on Seeking Alpha!

ORCL Chart

ORCL data by YCharts

Disclaimer: The author did not hold a position in Oracle Corporation (ORCL) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Oracle Corporation Quarterly Valuation – December 2014 $ORCL

500px-Oracle_logo.svg

Oracle performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short dividend history and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.29 in 2011 to an estimated gain of $2.41 for 2015. This is a very strong level of demonstrated growth which is well above the market’s implied estimate of only 5.39% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 17.23% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Oracle Corporation (ORCL) for greater perspective!

Read the full valuation on Seeking Alpha!

ORCL Chart

ORCL data by YCharts

Disclaimer:  The author did not hold a position in Oracle Corporation (ORCL) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Oracle Corporation Quarterly Stock Valuation – September 2014 $ORCL

500px-Oracle_logo.svg

Oracle Corp is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned with the short dividend history and the high PB ratio while the company passes all of the Enterprising Investor’s requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Intel Corp (INTC) .  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.29 in 2011 to an estimated $2.44 for 2015. This level of demonstrated growth outpaces the market’s implied estimate of 3.66% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Read the full valuation on Seeking Alpha!

ORCL Chart

ORCL data by YCharts

Oracle Corp Quarterly Valuation – June 2014 $ORCL

500px-Oracle_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Oracle Corp (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation is a provider of enterprise software and computer hardware products and services. The Company provides cloud services as well as software and hardware products to other cloud service providers, both public and private. The Company’s software business consists of two segments: new software licenses and cloud software subscriptions and software license updates and product support. The Company’s hardware systems business consists of two operating segments: hardware systems products and hardware systems support. The Company’s services business consists of the remainder of its operating segments and offers consulting services, managed cloud services and education services. Effective March 13, 2013, it acquired Nimbula Inc. Effective February 6, 2014, Oracle Corp acquired the entire share capital of Responsys Inc.

ORCL Chart

ORCL data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $40.82
MG Value $85.01
MG Opinion Undervalued
Value Based on 3% Growth $32.02
Value Based on 0% Growth $18.77
Market Implied Growth Rate 4.99%
Net Current Asset Value (NCAV) $0.57
PEmg 18.49
Current Ratio 3.39
PB Ratio 4.09

Balance Sheet – 2/28/2014

Current Assets $44,404,000,000
Current Liabilities $13,092,000,000
Total Debt $22,677,000,000
Total Assets $86,562,000,000
Intangible Assets $35,880,000,000
Total Liabilities $41,855,000,000
Outstanding Shares 4,483,000,000

Earnings Per Share

2014 $2.73
2013 $2.26
2012 $1.96
2011 $1.67
2010 $1.21
2009 $1.09
2008 $1.06
2007 $0.81
2006 $0.64
2005 $0.55
2004 $0.50

Earnings Per Share – ModernGraham

2014 $2.21
2013 $1.84
2012 $1.56
2011 $1.29
2010 $1.06
2009 $0.93

Dividend History

ORCL Dividend Chart

ORCL Dividend data by YCharts

Conclusion:

Oracle is suitable for the Enterprising Investor but does not qualify for the Defensive Investor, who is concerned with the short dividend history and the high PB ratio.  The company passes all of the Enterprising Investor’s requirements, though.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Hewlett Packard Co. (HPQ) and ModernGraham’s valuation of Microsoft Corp (MSFT).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.06 in 2010 to $2.21 for 2014.  This demonstrated level of growth outpaces the market’s implied estimate of 4.99% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out the previous ModernGraham valuations of Oracle Corp (ORCL) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Oracle Corp (ORCL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Oracle Corp (ORCL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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