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

International Business Machines Corp. (NYSE:IBM) is a tech giant that remains relatively mediocre. IBM has paid a dividend for the last 15+ years, with a current yield of 1.8% and only a payout ratio of 25%. This dividend does not make up for its middle-of-the-road valuation – 12x forward P/E – and long-term earnings growth rate in the high single digits. Billionaire Warren Buffett is still IBM’s top shareholder with nearly 20% of Berkshire’s 13F invested in the tech company (check out Warren Buffett’s other picks).

Cognizant Technology Solutions Corp (NASDAQ:CTSH) is a custom IT company that is also one of Oracle’s smaller competitors, but has the best growth rate of the bunch at 18%. With this high growth rate comes a premium valuation of 18x forward earnings. One point of concern is Cognizant’s low EBITDA margin of 21% when compared to its other peers. Interestingly, billionaire Jim Simons dumped his entire stake in Cognizant last quarter (see all of Simons’ key moves).

Adobe Systems Incorporated (NASDAQ:ADBE) is a widely known software company, but one that is also on the small side, nearly one-seventh the size of Oracle. Adobe also has a premium valuation with a 15x forward P/E and a 4x P/S, and is up 30% year to date. A key concern for the company is that this high end valuation is not supported by its mediocre five-year expected growth rate of 12%. Steven Cohen and SAC Capital were betting big on Adobe last quarter, upping their stake over 400% (see Cohen’s top bets).

Although Oracle’s dividend might be relatively nonexistent at 0.7%, we love the stock for its ‘growth at a reasonable price’ opportunity. Given its robust business offerings, it is hard not to be interested in Oracle, much like many billionaires are. Oracle is on our list of top ten tech stock loved by hedge funds (see all 10 here).