Oracle Corporation (ORCL): Is It a Good Investment?

Page 1 of 2

Oracle Corporation (NASDAQ:ORCL) is a giant in the enterprise software and database management industry. Oracle also has one of the leading positions in the quickly growing enterprise application marketplace. Research firm Gartner expects the enterprise resource planning industry to reach a size of $25 billion by the end of this year. Other drivers for Oracle will be increased spending on cloud computing and software-as-a-service markets, where global SaaS industry revenues are expected to be up 18% this year, and grow from $14 billion in 2012 to $22 billion in 2015.

Ken Fisher FISHER ASSET MANAGEMENT

Oracle has seen weakness in its hardware segment, but this has only marginally hurt the tech company given its diverse product portfolio. Future growth is expected to come from cloud computing systems, where Oracle has advantages over top rivals such as IBM and SAP. A focus on the cloud computing industry will only help fuel Oracle’s industry-leading position when it comes to high-margin products. Oracle’s EBITDA margin is upwards of 46%, where key competitors Cognizant and Adobe are at only 24% and 34%, respectively.

Oracle also remains proactive when it comes to acquisitions. Over the last ten years, the tech giant has shelled out more than $40 billion to acquire 80 companies, including Sun Microsystems. The Sun acquisition is expected to ultimately be the biggest long-term positive, as Oracle is now able to cross-sell its already robust software portfolio with its newly acquired hardware business.

From a valuation standpoint, Oracle is the cheapest when compared to major peers on a forward P/E basis at 11x. This is also below the tech company’s long-term historical P/E of 15x. Billionaire Ken Fisher – founder of Fisher Asset Management and long-time Forbes columnist – is Oracle’s top fund owner (check out Fisher’s newest picks).

Microsoft Corporation (NASDAQ:MSFT) is another tech company with a penchant for product diversification. This tech giant pays the highest dividend of Oracle’s peers at 3.4% with a payout ratio that is only 37%. Microsoft is a hedge fund favorite given its history of solid dividend increases, but it also has a portfolio that could present growth opportunities, including its Surface tablet, latest Windows OS and Office Suite. Microsoft is also one of the cheapest stocks in the industry at an 8x forward P/E. David Einhorn was one of the many billionaires owning Microsoft last quarter (see Einhorn’s new bets).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!