Oracle’s scale in the software space
As of September 19, 2016, Microsoft (MSFT) continued to be the world’s largest software player by market capitalization, followed by Oracle (ORCL), Red Hat (RHT), ServiceNow (NOW), and Tableau Software (DATA).
Oracle’s valuation multiples
Oracle was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~8.8x on September 19, 2016. This metric was lower than Microsoft’s multiple of ~9.9x.
By comparison, Red Hat’s and ServiceNow’s multiples stood at ~16.3x and ~32.3x, respectively, as of the same date.
Oracle’s dividend yield
Oracle’s forward annual dividend yield was ~1.5% on September 19, 2016—lower than Microsoft’s forward dividend yield of ~2.5% on the same date. ServiceNow and Tableau Software don’t pay dividends.
You can consider investing in ETFs like the PowerShares QQQ Trust, Series 1 ETF (QQQ) to gain exposure to Microsoft, which makes up 8.4% of QQQ. Investors seeking application software exposure can also consider this fund. Notably, application software makes up ~28.4% of QQQ.
In the next and final part of this series, we’ll discuss analyst recommendations for Oracle’s stock.