Oracle (ORCL) is turning up everywhere. I have seen the company appear on most value screens I have recently ran and it's a top pick of major value investors. Let's take a closer look at what others are seeing.
Moat, Margin of Safety, & ROE
Oracle has an enviable market leader position in the database market that gives it a comfortable economic moat. Oracle's moat should allow it to earn excess profits over the long haul. Currently Oracle is also selling for about 80% of its $40 fair value giving a margin of safety of 20%. In addition, Oracle has an amazing ROE of 28%. Oracles profit margin is a very high 34%.
Operations & Acquisitions
Oracle operates in three computing areas computer hardware, software, and services. Oracle has been pushing hard into new areas like cloud computing and social interaction in companies.
Oracle has been busy growing through acquisitions having most recently acquired SUN Microsystems. In all, Oracle has acquired 41 companies in the last 5 years with the focus on cloud computing and social management companies. Oracle's growth strategy appears to be paying off for shareholders. Each acquisition has helped keep oracle ahead of the competition and help ensure their economic moat remains solid.
Firing on All Cylinders
Oracle is moving in the right direction for operations, financially, and on a valuation basis. Oracle has apparently successfully transformed its business by becoming a cloud based provider of its services. The company has successfully increased its profit margin from 29% in 2007 to 33.6% in 2012. This stock seems to have some room to run and excellent growth potential. Oracle appears to be a solid growth story that you can buy with a built-in margin of safety.
Disclosure: I have a long position in Oracle.
Disclosure: I am long ORCL.