Oracle Earnings 2QF16: Cloud Growth Remains Sluggish in Americas
Oracle and its peers
A company’s PE (price-to-earnings) ratio indicates how much its investors must pay for every dollar a company earns. The lower the ratio, the better it is for investors. Oracle (ORCL) has a PE ratio of 21.7 compared to peers VMWare (VMW) at 17.1 and Microsoft (MSFT) at 19.6. A company with a high PE ratio indicates positive future growth, allowing investors to be willing to pay a higher price per share.
The chart below represents the key ratios that indicate the financial health of Oracle (ORCL) and its performance compared to its industry peers.
Enterprise value
Enterprise value (or EV) is a strong indicator for a company’s valuation. EV is considered an accurate measure for valuing a company because it doesn’t take into account the company’s debt that it must repay.
The lower the EV-to-sales ratio, the more attractive or undervalued the company is believed to be. Oracle and Microsoft show an EV-to-sales ratio of 2.8 and 2.8, respectively. This is followed by VMWare at 3.9 and F5 Networks (FFIV) at 4.2.
EBITDA and price-to-book ratio
EBITDA (earnings before interest, tax, depreciation, and amortization) is the measure of cash flows from a company’s operations. EBITDA doesn’t take into consideration the capital structure utilized by a company. It simply gives the company’s profitability from its core operations. A lower ratio indicates that investors are paying less for a more profitable company. VMWare (VMW) shows the lowest ratio of 10.2 among its industry peers, followed by Microsoft’s ratio of 11.7, Oracle’s ratio of 17.0, and F5 Networks’ ratio of 18.8.
VMWare (VMW) shows the lowest ratio of 10.2 among its industry peers, followed by Microsoft at 11.7, Oracle at 17.0, and F5 Networks at 18.8.
The price-to-book ratio indicates how investors perceive the company. A higher price-to-book ratio indicates that investors have high expectations for a company’s growth. Oracle (ORCL) has a price-to-book ratio of 3.2, the lowest among its peers. VMWare’s price-to-book ratio is 3.4, while Microsoft’s is 5.3 and F5 Networks’ is 5.7.
The iShares U.S. Technology ETF (IYW) is a portfolio of 150 stocks. Oracle makes up 3.5% of IYW.
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