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Oracle’s Value Proposition: A Peer Comparison


Jun. 23 2016, Updated 12:05 p.m. ET

Oracle’s scale in the software space

Earlier in this series, we discussed Oracle’s (ORCL) growth initiatives in the cloud space. In this part, we’ll compare the value proposition of the company and other software companies in the United States.

As of June 20, 2016, Microsoft (MSFT) was the world’s largest software player by market capitalization. Oracle followed. Red Hat (RHT), ServiceNow (NOW), and Tableau Software (DATA) are some other leading players in the systems software space.

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Oracle’s valuation multiples

Let’s look at Oracle’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. We’ll also look at other US software players’ multiples.

Oracle was trading at a forward EV-to-EBITDA multiple of ~8.91x on June 20, 2016. This metric was lower than Microsoft’s multiple of ~9.41x. Red Hat’s and ServiceNow’s multiples stood at ~17.2x and 30.07x, respectively.

Oracle’s dividend yield

Oracle’s forward annual dividend yield was ~1.5% on June 20, 2016. This was higher than Microsoft’s forward dividend yield of ~2.8% on the same day. ServiceNow and Tableau Software don’t pay dividends.

Investors who want to gain exposure to Oracle could consider investing in the Technology Select Sector SPDR ETF (XLK). XLK invests ~3% of its holdings in Oracle. It also has 31% exposure to the application software space. In the final part of our series, we’ll see what kind of recommendations analysts are giving on Oracle.


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