Oracle Corporation (ORCL)’s Cash Pile Suggests Long-term Gains

What about the rest?

Oracle holds a rather diversified product and services portfolio, which means that it competes with an extensive set of companies. Nevertheless, in terms of product offerings, some of its closest competitors include International Business Machines Corp. (NYSE:IBM) and SAP AG (ADR) (NYSE:SAP). So I decided to see how Oracle’s key growth, financial, and cash flow indicators compare to its rivals.

5-year Revenue CAGR% Debt-to-equity ratio Current Ratio Operating Margin% (ttm) Free cash flow /Sales % (ttm)
Oracle 15.6% 0.46 3.33 38.49% 34.44%
IBM 8.7% 1.75 1.13 20.59% 15.48%
SAP 3.2% 0.37 1.05 25.10% 21.53%

Source: Yahoo! Finance and Morningstar

Oracle appears to be the hands-down winner in the revenue race. Also, its cash-generating capacity and overall financial discipline underlie the sustainability of its acquisition strategy.

SAP reported impressive fourth-quarter results, indicating strong demand for its cloud and mobile applications, as well as its in-memory database platform, HANA. Yet the acquisition of SuccessFactors, Inc. (NYSE:SFSF) and Ariba, Inc. (NASDAQ:ARBA) in 2012 left a noticeable mark on the company’s net cash position. Net liquidity at the end of 2012 stood at – €2.50 billion (-$3.30 billion) compared to €1.64 ($2.16 billion) the prior year.

For full-year 2012, IBM achieved a noteworthy year-over-year growth in diluted EPS, but total revenue remained flat compared to 2011. Overall, its balance sheet revealed mixed results. IBM ended 2012 with $11 billion in cash on hand, roughly as much as it had the previous year. However, the company’s total current assets hardly exceeded its total current liabilities.

Bottom line

To sum up, a large cash pile means safety for turbulent times. Most importantly, cash provides flexibility in addressing the capital needs of an aggressive growth policy. Oracle is a living example.

So far, the firm’s strong cash position has enabled it to take advantage of acquisition opportunities. This way, Oracle established a strong foothold in the competitive application software industry and boosted its growth potentials. Oracle’s future looks bright with Morningstar indicating a greater than 14% five-year growth forecast.

The article Oracle’s Cash Pile Suggests Long-term Gains originally appeared on and is written by Fani Kelesidou.

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