Oracle Corp (NYSE:ORCL) has experienced a daily gain of 1.87% and a 3-month gain of 14.43%. With an Earnings Per Share (EPS) of 3.06, the question arises: is the stock modestly overvalued? This article aims to answer this question by providing a comprehensive valuation analysis of Oracle Corp (NYSE:ORCL).
Oracle Corp, established in 1977, is a global leader in database technology and enterprise resource planning software. The company serves 430,000 customers in 175 countries with its 136,000 employees. Currently, Oracle’s stock price is $123.19, while its estimated fair value, known as the GF Value, is $97.7. This suggests that the stock may be overvalued.
The GF Value is a proprietary measure that represents a stock’s intrinsic value. The GF Value is computed based on historical trading multiples, a GuruFocus adjustment factor, and future estimates of business performance. It provides a visual representation of a stock’s fair trading value.
According to calculations, Oracle Corp (NYSE:ORCL) appears to be modestly overvalued. Its current market capitalization is $334.40 billion with a stock price of $123.19 per share. The overvaluation indicates that the future return of Oracle’s stock is likely to be lower than its business growth.
When considering an investment, it is important to evaluate a company’s financial strength. Oracle’s financial strength is rated 4 out of 10 by GuruFocus, indicating a weak balance sheet. This rating is determined by factors such as cash-to-debt ratio, with Oracle’s ratio of 0.11 being lower than 92% of companies in the Software industry.
Investing in profitable companies with consistent long-term profitability is generally less risky. Oracle has been profitable for the past 10 years, with a revenue of $50 billion and an EPS of $3.06 in the past twelve months. The company’s operating margin of 27.37% ranks better than 93.94% of companies in the Software industry, indicating strong profitability.
However, Oracle’s growth ranks worse than 50.18% of companies in the Software industry, despite an average annual revenue growth of 15%. The 3-year average EBITDA growth is 9.4%. Comparing Oracle’s Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) reveals that the ROIC slightly falls below the WACC over the past 12 months.
In conclusion, Oracle Corp (NYSE:ORCL) appears to be modestly overvalued. While the company exhibits strong profitability, its weak financial condition and below-average growth could impact long-term returns. Investors should consider the valuation analysis and additional factors before making investment decisions.
Definitions:
- Earnings Per Share (EPS): A financial metric that represents a company’s profit divided by the number of outstanding shares. It is an indicator of a company’s profitability.
- GF Value: An estimation of a stock’s fair value calculated using historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates.
- Financial Strength: The ability of a company to meet its financial obligations and maintain stable financial health.
- Profitability: The ability of a company to generate profits. It is often measured by metrics such as operating margin and return on investment.
- Return on Invested Capital (ROIC): A measure of a company’s profitability relative to the total amount of capital invested in its operations.
- Weighted Average Cost of Capital (WACC): A calculation of a company’s average cost of financing, taking into account the mix of debt and equity used to fund its operations.
Sources:
- “Oracle (ORCL): A Closer Examination of Its Modest Overvaluation”
- “These companies may deliver higher future returns at reduced risk”
Oracle Corp (NYSE:ORCL) has experienced a daily gain of 1.87% and a 3-month gain of 14.43%. With an Earnings Per Share (EPS) of 3.06, the question arises: is the stock modestly overvalued? This article aims to answer this question by providing a comprehensive valuation analysis of Oracle Corp (NYSE:ORCL).
Oracle Corp, established in 1977, is a global leader in database technology and enterprise resource planning software. The company serves 430,000 customers in 175 countries with its 136,000 employees. Currently, Oracle’s stock price is $123.19, while its estimated fair value, known as the GF Value, is $97.7. This suggests that the stock may be overvalued.
The GF Value is a proprietary measure that represents a stock’s intrinsic value. The GF Value is computed based on historical trading multiples, a GuruFocus adjustment factor, and future estimates of business performance. It provides a visual representation of a stock’s fair trading value.
According to calculations, Oracle Corp (NYSE:ORCL) appears to be modestly overvalued. Its current market capitalization is $334.40 billion with a stock price of $123.19 per share. The overvaluation indicates that the future return of Oracle’s stock is likely to be lower than its business growth.
When considering an investment, it is important to evaluate a company’s financial strength. Oracle’s financial strength is rated 4 out of 10 by GuruFocus, indicating a weak balance sheet. This rating is determined by factors such as cash-to-debt ratio, with Oracle’s ratio of 0.11 being lower than 92% of companies in the Software industry.
Investing in profitable companies with consistent long-term profitability is generally less risky. Oracle has been profitable for the past 10 years, with a revenue of $50 billion and an EPS of $3.06 in the past twelve months. The company’s operating margin of 27.37% ranks better than 93.94% of companies in the Software industry, indicating strong profitability.
However, Oracle’s growth ranks worse than 50.18% of companies in the Software industry, despite an average annual revenue growth of 15%. The 3-year average EBITDA growth is 9.4%. Comparing Oracle’s Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) reveals that the ROIC slightly falls below the WACC over the past 12 months.
In conclusion, Oracle Corp (NYSE:ORCL) appears to be modestly overvalued. While the company exhibits strong profitability, its weak financial condition and below-average growth could impact long-term returns. Investors should consider the valuation analysis and additional factors before making investment decisions.
Definitions:
- Earnings Per Share (EPS): A financial metric that represents a company’s profit divided by the number of outstanding shares. It is an indicator of a company’s profitability.
- GF Value: An estimation of a stock’s fair value calculated using historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates.
- Financial Strength: The ability of a company to meet its financial obligations and maintain stable financial health.
- Profitability: The ability of a company to generate profits. It is often measured by metrics such as operating margin and return on investment.
- Return on Invested Capital (ROIC): A measure of a company’s profitability relative to the total amount of capital invested in its operations.
- Weighted Average Cost of Capital (WACC): A calculation of a company’s average cost of financing, taking into account the mix of debt and equity used to fund its operations.
Sources:
- “Oracle (ORCL): A Closer Examination of Its Modest Overvaluation”
- “These companies may deliver higher future returns at reduced risk”
