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A Look at Oracle’s Valuation and Stock Returns

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Apr. 17 2019, Published 9:32 a.m. ET

ORCL’s returns

Tech giant Oracle (ORCL) has generated a return of 18.5% in the last 12 months. Since the start of 2019, the stock has risen 21%. It’s gained 33% in the last three years and 37% in the last five years.

The rise in the company’s sales has driven its market cap growth. Oracle’s revenue rose from $37 billion in 2016 to $40 billion in 2018, and its EPS have risen at a CAGR (compound annual growth rate) of just 3.7% in the last five years.

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Oracle stock is currently trading 0.6% below its 52-week high of $54.91 and 29% above its 52-week low of $42.4. With a relative strength index score of 62, Oracle stock is trading close to overbought territory.

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Is Oracle overvalued?

Oracle has a forward PE ratio of 19.4x for 2019. For 2020, this ratio is 17.8x. Analysts expect its sales to fall 1.4% in 2019 and rise 2.20% in 2020. Its EPS are expected to rise 10.3% in 2019 and 9.3% in 2020.

Oracle’s EPS could grow at a CAGR of 10.4% over the next five years. The stock looks overvalued even if it falls 30%. Oracle has a dividend yield of 1.5%.

Analysts’ recommendations

Of the 36 analysts covering Oracle, 26 have given it “buy” recommendations, nine have given it “hold” recommendations, and one has given it a “sell” recommendation. The average 12-month target price for Oracle is $53.07, which indicates a potential downside of 2.8% from its current level.

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