Is Oracle Corporation A Buy?

• 2 min read

At the end of every year I like to scan the market for good stocks at cheap prices. Sometimes I like to revist past holdings and see if they’re worth buying again, like Oracle Corporation - ORCL I used to hold this bad boy as part of my Four Horseman portfolio in the late 1990′s and rode it down most of the way during the Dot Com implosion; ORCL closed at $21.14 on Friday.

Technical Analysis

ORCL has been in a nice uptrend for several months now and always manages to bounce off its trend line. The price action reveals that its going through a “coiling” action where a breakout on either side of the trendline could happen. Based on the trend, one could assume that it will break out on the upside but this is the stock market! Anything can happen! Technically, the chart looks healthy and I would enter a small position here if I were purely trading that way.

ORCL, 12/07/2007

Fundamental Analysis

S&P rates ORCL a 5 star stock and fundamentally its a toss up for me. It’s PE ratio is currently 24.9, FWD PE ratio is 16.9, its one year earnings growth estimate is 26.84% and 5 year earnings growth estimate is 15.72%. Although I’d like to see a 5 year earnings forecast at least 20%, I’m glad its FWD PE ratio is less than its current PE ratio (a lower FWD PE ratio means forecast higher earnings growth). The two things that give me a bit of pause is the rich PE ratio of 24.9 and the below 20% 5 year earnings forecast.

However, if you take into account ORCL's total debt to equity ratio of 0.35, its gross and net margins of 76.9% and 23.5% respectively, and its growth into the business intelligence market, I think ORCL might be a cautious buy.

Summary

I’m tempted to buy a few shares of ORCL but I’m taking a wait to see approach right now. I’m keenly interested in which way it breaks out on the trendline first.

Disclosure: No positions in ORCL

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