Considering the Oracle stock at a price of $220: Buy or Hold?
Oracle's Strong Performance and Recovery
Oracle, the technology giant, has been making headlines recently due to its impressive financial performance and resilience in the face of various economic shocks.
According to the latest financial reports, Oracle's balance sheet looks robust, with a strong cash position. Cash makes up 6.7% of Oracle's Total Assets, providing a solid foundation for the company's operations.
Oracle's valuation is currently 11 times its trailing revenue, which is higher than its three-year average price-to-sales multiple of 6 times revenue. However, the company's high valuation is not a cause for concern, as its strong financial performance justifies this.
Oracle's shares (NYSE: ORCL) have been on an upward trajectory, with the company's shares up over 60% over the past twelve months. Last week, however, saw a minor setback, with Oracle stock falling 5%.
Despite this temporary decline, Oracle's performance across growth, profitability, financial stability, downturn resilience, and overall is strong. During the Inflation Shock (2022), Oracle stock fell 41.1% and fully recovered by 25 May 2023. Similar trends were observed during the Global Financial Crisis (2008) and the Covid Pandemic (2020), where Oracle stock fell 41.1% and 28.6% respectively, but recovered fully.
Oracle's most recent quarterly revenues grew 11.3% to $16 Billion, and its revenues have shown growth in recent years, with an average growth rate of 10.7% over the last 3 years. In the last 12 months, Oracle's revenues grew 8.4% from $53 Billion to $57 Billion.
The company's strong financial performance is also reflected in its Operating Cash Flow (OCF) and Operating Income. Over the last four quarters, Oracle's OCF was $21 Billion, pointing to a high OCF Margin of 36.3%. Similarly, Oracle's Operating Income over the same period was $18 Billion, representing a high Operating Margin of 31.5%.
Oracle's Debt-to-Equity Ratio is 16.4%, which is lower than the S&P 500's 20.3%, indicating a healthier financial position. This, coupled with Oracle's high Net Income Margin of 21.7% (indicating a Net Income of $12 Billion for the last four quarters), paints a picture of a financially stable company.
The Trefis High Quality (HQ) Portfolio, a collection of 30 stocks, has outperformed the S&P 500 over the last 4-year period. The HQ Portfolio's performance metrics indicate less of a roller-coaster ride compared to the S&P 500, making it a more stable investment option. Furthermore, the HQ Portfolio provides better returns with less risk compared to the benchmark index.
In conclusion, Oracle's strong financial performance, resilience in the face of economic shocks, and stable growth make it an attractive investment option. Despite a minor setback last week, Oracle's shares have been on an upward trajectory, and the company shows no signs of slowing down.
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