Oracle (ORCL) announced earnings today that beat estimates for sixth time in the last seven quarters. The company continues to beat very low expectations and is stuck at extremely cheap valuations for such a consistently growing tech firm. Value and growth investors should take note and pick up this unappreciated equity at these low entry points as eventually the market will reward a higher multiple to these undervalued shares.
Key Highlights from Oracle's earnings call and report:
- The company came in with 82 cents in EPS, above consensus estimates of 78 cents a share. Revenues met expectations.
- The company hit an all-time high for a fiscal year's operating margins which hit 46%.
- The company after some strategic acquisitions is now on track to be the second-largest software-as-a-service company in the world behind Salesforce.com (CRM).
- A new $10B stock buyback authorization was announced.
4 reasons Oracle is still undervalued at $28 a share:
- ORCL is still selling at the bottom of its five year valuation range based on P/S, P/E, P/CF and P/B.
- The stock is selling at just 9.5 forward earnings, a significant discount to its five year average (13.7).
- The company is not getting credit for its growth that it deserves from the market. The company has increased net income at 17% to 18% over the last few quarters in line with its five year average EPS growth (18.1%), yet the stock has a five year projected PEG of under 1 (.85).
- Operating cash flow has grown over 50% over the last 2 ½ years and sells for less than 10 times current operating cash flow. It also has approximately $15B in net cash on its balance sheet.
Disclosure: I am long ORCL. Also short CRM using an option strategy