Comedian Rodney Dangerfield built an entire career around the phrase "I don't get no respect." Oracle (NAS: ORCL) has built a business around providing superior enterprise software and hardware for more than 30 years, but it likewise isn't getting the respect it deserves from the market.
Do these numbers make me look fat?
For the quarter ended Aug. 31, there's plenty to like about Oracle. In fact, there's quite a lot you'll flat0out love. Versus the same quarter last year:
Total revenue is up 12%.
Operating margin is up, from 25% to 32%.
Profits are up 36%.
TTM operating cash flow was $12.8 billion, up 46%.
The company has $13.1 billion in cash and no debt.
These numbers range from pretty bloody good to absolutely fabulous. OK, gross margin was down a hair, from 82% to 80%. But c'mon, 80% is a killer gross margin in anyone's book, annihilating peer IBM's (NYS: IBM) measly 46%. So let's cut the company a little well-earned slack here.
I love you, you're perfect, now change
In this two-speed economy of ours, consumers may not have money to spend, but companies do. Corporate balance sheets are healthier than ever, and Oracle sells primarily to just these types of cash-flush businesses. More than half of Oracle's revenues come from business services and software updates, both of which are sticky and high-margin.
Also, Oracle's core database, server, and applications businesses don't face the same sort of disruptive competition that, for example, threatens Microsoft's (NAS: MSFT) operating-system business as personal computers go mobile. And unlike many tech companies, Oracle is disciplined about using its ample free cash for acquisitions.
Why do Fools fall in love?
Fools recognize an awesome value when they see it. Trading for just under $30 per share with a very reasonable P/E of 17, that's exactly what Oracle is.
Why such a low price and valuation? It's the hard limit the market seems to put on all "aging" tech stocks these days, like CA Technologies (NAS: CA) , which is $20 per share with a P/E of 12. Or even SAP AG (NYS: SAP) , which is doing a bit better at $52 per share and a P/E of 24.
But to be Foolish is to be contrarian. Show some respect to Oracle, and to your portfolio, and think about picking up a few shares of this underpriced, undervalued company.
At the very least, add Oracle to My Watchlist, a free service of The Motley Fool. It's an easy way to keep track of the stocks on your investing radar.
At the time thisarticle was published Fool contributorJohn Grgurichworries that these stocks make him look fat, but he doesn't own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Oracle, Microsoft, and IBM.Motley Fool newsletter serviceshave recommended buying shares of and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has an absolutely scintillatingdisclosure policy.
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