Oracle ORCL
What does Oracle do?
Oracle is a US provider of enterprise software and cloud infrastructure. The offering ranges from databases and middleware to applications for finance, human resources, supply chain and customer relationships (Fusion, NetSuite), as well as industry-specific solutions, for example in healthcare. It also includes Oracle Cloud Infrastructure, which provides computing, storage and database services as a service.
Revenue comes from cloud services, licenses and maintenance and support contracts, which often run for the long term. Customers are mainly large enterprises, government agencies and organizations with business-critical systems. In competition, Oracle holds a strong position in enterprise databases, which creates high customer loyalty. In cloud infrastructure, the company competes with significantly larger hyperscalers, and in applications with SAP, Microsoft, Salesforce and Workday. Differentiation arises from the integration of database, applications and infrastructure from a single provider.
Score profile
Rank vs. Software - Infrastructure (50 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Oracle ranks above average in the group Software - Infrastructure (7.5/10). On growth, the company ranks above average in the group Software - Infrastructure (7.5/10). On valuation (higher = cheaper), the stock ranks above average in the group Software - Infrastructure (6.4/10). On financial strength, Oracle ranks in the bottom fifth in the group Software - Infrastructure (1.6/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 10.7x | 16.0x | better than 73 % |
| Trailing P/E | 18.5x | 31.5x | better than 73 % |
| PEG ratio | 0.6x | 1.4x | better than 76 % |
| EV/EBITDA | 14.5x | 20.0x | better than 64 % |
| Price/sales | 5.1x | 3.8x | better than 43 % |
| Price/book | 5.8x | 5.8x | better than 50 % |
| Revenue growth | 29.6% | 14.3% | better than 83 % |
| Earnings growth | 54.5% | 24.4% | better than 68 % |
| Gross margin | 64.0% | 72.3% | better than 37 % |
| Operating margin | 35.6% | 13.3% | better than 89 % |
| Net margin | 26.4% | 10.5% | better than 85 % |
| Return on equity | 41.2% | 12.4% | better than 89 % |
| Debt/equity | 251.7% | 17.5% | better than 17 % |
| Current ratio | 1.2x | 1.5x | better than 30 % |
| Free cash flow yield | -12.5% | 3.7% | better than 1 % |
| Dividend yield | 1.7% | 1.1% | – |
| Payout ratio | 31.4% | 31.4% | – |
| Beta | 1.78 | 1.04 | – |
Valuation: what is Oracle worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Oracle a model range of 176.97 USD to 178.79 USD per share.
40 analysts, average rating “Buy”, average price target 235.77 USD (+99.9%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The installed base of databases generates recurring support revenue and makes it easier to sell additional cloud services.
- Demand for cloud infrastructure, particularly for compute-intensive applications such as AI, determines growth in the infrastructure business.
- The migration from legacy systems to cloud applications increases the share of predictable, subscription-based revenue.
Risks
- Building out data centers requires high investment and, if utilization is weak, can weigh on cash flow and profitability.
- Strong competition from larger cloud providers and application specialists can put pressure on prices and market share.
- High dependence on a few large customers and long-term contracts increases risk in the event of delays or contract changes.
What to look for with Oracle
Free cash flow relative to capital expenditure shows whether the capital-intensive cloud build-out actually generates funds sustainably or is financed through debt.