Oracle (ORCL) has once again drifted below $30 a share. Given its earnings growth and valuation, I am adding to my position before it announces earnings next week.
“Oracle Corporation, an enterprise software company, develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide”. (Business description from Yahoo Finance)
7 reasons why Oracle is a solid bargain at under $30 a share:
1. The company reports earnings next week. It has consistently beat consensus estimates. ORCL has beaten its projected quarterly earnings estimates each of the last six quarters.
2. Oracle is selling in the bottom third of its five year valuation range based on P/E, P/S, P/B and P/CF.
3. At current price levels, you are getting ORCL at 11 times forward earnings. This for a company that has grown EPS north of 18% annually over the past five years.
4. Oracle has a pristine balance sheet. Over 10% of its market capitalization is in net cash.
5.Its projected five year PEG is just .9 and has a low beta (1.09) for a tech stock.
6. Oracle is a five star pick from S&P with a price target of $40. It also is Credit Suisse’s top pick in the sector with a price target of $42.
7. Analysts predict solid 8% revenue growth for FY2011 and FY2012 and ORCL is one of the best firms in the sector for acquiring and integrating other software companies.
Disclosure: I am long ORCL.