The enterprise software giant is well on its way to realizing a great year in 2014. It is showing a lot of signs that it is financially stable and preparing for record growth in the coming years. The technology market as a whole is expected to grow in general but Oracle Corp (ORCL, Financial) is going to be a particularly exciting stock to watch in 2014.
Strength in numbers
The company has a healthy relative strength of 62.79 which is likely to grow after the many strategic acquisitions it has been working on in 2013 and the beginning of this year (further details about these can be found below).
Investors should also appreciate the high level of insider ownership (currently at 24.80%) showing that the company itself is confident in its ability to grow in the future. This is a key factor for many value investing strategies as low insider ownership can be taken as a sign that the company is unsure about future earning potential.
Another sign of the company’s confidence in its current position and future growth potential is that the number of outstanding shares has been decreasing over the years. Currently, the number of shares outstanding is 4.54 billion. Many successful investors, including the great Piotroski, argue that increasing numbers of shares outstanding are often a sign of panic or desperation in the company so Oracle Corps is showing strength in this regard.
Furthermore, Oracle Corps has a strong profit margin of 29.40%. Its profit margin has been increasing over the past few months and is fast approaching its five year peak of 35%. This information is even more significant when we see that its cash flow from operations (or, CFO) has been steadily increasing year over year from $11,214,000 in 2011 to 14,224,000 in 2013 so this growth in profits can be attributed to sustainable growth in revenue from regular business activities.
The analysts have seen this strength and potential in Oracle Corps and rate it as very bullish in spite of the general consensus that it is leaning more toward the bearish end of the spectrum (meaning that the stock is likely currently undervalued by the market as a whole).
What to look forward to in 2014:
In recent months, Oracle Corps has been working to acquire a great number of companies as part of a larger strategy to expand into cloud based services and marketing technology software. As part of this strategy, it purchased Acme Packets, Inc (APKT, Financial) and Eloqua, Inc (ELOQ, Financial) in 2013, a telecommunications service provider and marketing technology firm respectively.
Earlier this month, it also purchased Corente, a cloud services provider. It also has plans to buy Responsys, Inc (NASDAQ: MKTG) a marketing software and service provider. This large number of acquisitions that Oracle has been able to make without dramatically increasing its debt will allow the company to expand into growing markets and potentially see dramatically increasing revenue.
The technology market is going to be an exciting one in 2014 and Oracle has made it clear that it is going to get its fair share of the predicted growth by expanding into the most promising sectors of that market. The numbers also support this positive outlook.
Conclusions:
Based on current figures and historical trends as well as the many acquisitions which hint toward the potential for record level growth, Oracle Corps is a definite buy and would be a strong addition to any portfolio. The stock is up 14% over the past three months and shows every sign of continuing upward. So if you are a price momentum investor, this is a particularly attractive stock. Growth investors should also take interest as all these acquisitions are likely to translate into an increased growth rate over the next few years. At the current price of $38.15, Oracle Corp’s stock is almost certainly undervalued, making it a bargain purchase with a lot of potential.
