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Oracle’s Value Proposition: A Peer Comparison

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Dec. 4 2020, Updated 10:53 a.m. ET

Oracle’s scale in the software space

Earlier in this series, we discussed Oracle’s (ORCL) fiscal 2016 results and its 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.

On June 29, 2016, Microsoft (MSFT) was the world’s largest software player by market capitalization, followed by IBM (IBM). Oracle and SAP (SAP) are some other leading players in the software space.

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Oracle’s valuation multiples

Let’s look at Oracle’s EV-to-EBITDA[1. 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 ~8.6x on June 29, 2016. This metric was lower than Microsoft’s multiple of ~9.x. Red Hat’s and ServiceNow’s multiples stood at ~16.2x and ~27.0x, respectively.

Oracle’s dividend yield

Oracle’s forward annual dividend yield was ~1.9% on June 29, 2016. This was higher than Microsoft’s forward dividend yield of ~2.8% on the same day. ServiceNow and RedHat 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.

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