Thursday, October 06, 2011

Oracle (ORCL) 2011 Review

Oracle develops, manufactures, markets, distributes and services database and middleware software, applications software and hardware systems (computer server and storage devices). The company has grown earnings at a 20% rate over the last ten years. It has paid a dividend for only three years; but that dividend has grown from $.05 per share to $.21. ORCL has consistently earned a 25%+ return on equity. This outstanding performance should continue as a result of:

(1) an improvement in global application spending,

(2) continued spending on R&D generates a solid product pipeline,

(3) acquisitions,

(4) an ongoing cost reduction effort,

(5) a stock buy back program.


(1) there are substantial integration costs associated with the recent acquisition on Sun Microsystems,

(2) its numerous acquisitions has led to goodwill and intangible assets equaling 40% of total assets; in addition, integrating these acquisitions are a distraction from its core business,

(3) its high debt level increases its financial risk,

(4) intense competition.

ORCL is rated A++ by Value Line, has a 27% debt to equity ratio and its stock yields 0.9%.

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2009
ORCL 0.9% 19% 10% 2
IND1.3 12*25 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
ORCL 27% 28% 0 32% A++
IND 17 25 NA 11 NA

*almost no company in ORCL's industry pays a dividend


Notes: ORCL stock made excellent progress off its March 2009 low, quickly surpassing the down trend off its August 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an up trend (straight blue lines). Until recently, it was also in an intermediate term up trend; however, it broke that trend and re-set to an intermediate term trading range (purple lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a 75% position in ORCL. Shares would be Added at $26; the lower boundary of its Sell Half Range is $47.