Oracle Corp. (NASDAQ:ORCL) reports preliminary financial results for the quarter ended 2012-08-31.
Oracle Corp. recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. CapitalCube's analysis is based on the company's performance over the last twelve months (unless stated otherwise).
Oracle Corp.'s analysis versus peers uses the following peer-set: Microsoft Corp. (NASDAQ:MSFT), SAP AG ADS (NYSE:SAP), EMC Corp. (EMC), VMware Inc. (NYSE:VMW), Intuit Inc. (NASDAQ:INTU), Adobe Systems Inc. (NASDAQ:ADBE), Citrix Systems Inc. (NASDAQ:CTXS), Symantec Corp. (NASDAQ:SYMC) and CA Inc. (NASDAQ:CA). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
|Quarterly (USD million)||2012-08-31||2012-05-31||2012-02-29||2011-11-30||2011-08-31|
|Revenue Growth %||(25.1)||20.8||2.8||5.0||(22.3)|
|Net Income Growth %||(41.1)||38.2||14.0||19.1||(42.7)|
|Net Margin %||24.9||31.6||27.6||24.9||22.0|
|ROE % (Annualized)||18.6||31.9||23.5||21.1||18.2|
|ROA % (Annualized)||10.5||18.1||13.6||11.9||9.9|
Oracle Corp.'s current Price/Book of 3.7 is about median in its peer group. The market expects Oracle Corp. to grow at about the same rate as its chosen peers (PE of 15.9 compared to peer median of 19.6) and to maintain the peer median return (ROE of 24.0%) it currently generates.
The company attempts to achieve high profit margins (currently 27.6% vs. peer median of 18.3%) through differentiated products. It currently operates with peer median asset turns of 0.5x. Oracle Corp.'s net margin is its highest relative to the last four years and compares to a low of 22.9% in 2010.
Changes in the company's annual top line and earnings (4.2% and 16.8% respectively) generally lag its peers. This implies a lack of strategic focus and/or inability to execute. We view such companies as laggards relative to peers.
Oracle Corp.'s return on assets is above its peer median both in the current period (13.4% vs. peer median 9.0%) and also over the past five years (12.5% vs. peer median 9.3%). This performance suggests that the company's relatively high operating returns are sustainable.
The company's gross margin of 80.6% is around peer median suggesting that Oracle Corp.'s operations do not benefit from any differentiating pricing advantage. However, Oracle Corp.'s pre-tax margin is more than the peer median (36.0% compared to 25.9%) suggesting relatively tight control on operating costs.
Growth & Investment Strategy
While Oracle Corp.'s revenues have grown faster than the peer median (16.9% vs. 8.9% respectively for the past three years), the market gives the stock an about peer median PE ratio of 15.9. This suggests that the market has some questions about the company's long-term strategy.
Oracle Corp.'s annualized rate of change in capital of 19.4% over the past three years is higher than its peer median of 13.9%. This investment has generated an above peer median return on capital of 16.4% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.
Oracle Corp. has reported relatively strong net income margin for the last twelve months (27.6% vs. peer median of 18.3%). This margin performance combined with relatively low accruals (10.3% vs. peer median of 14.9%) suggests possible aggressive accounting and an overstatement of its reported net income.
Oracle Corp.'s accruals over the last twelve months are positive suggesting a buildup of reserves. But this level of accruals is less than the peer median -- which suggests that while the company is building reserves, it is doing so in a relatively modest manner compared to its peers.
Oracle Corp. provides enterprise software and computer hardware products and services. The company is organized into three businesses: Software, Hardware Systems and Services. Oracle was founded on June 16, 1977 by Lawrence Joseph Ellison, Robert Nimrod Miner and Edward A. Oates and is headquartered in Redwood City, CA.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you're agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website analytixinsight.com.