Oracle (ORCL) has broken out to all-time highs along with the S&P 500 this morning after the company reported strong fourth quarter results.
The stock is up 8%, which is a huge move for the $200 bln software behemoth. The company exceeded estimates on the top and bottom line for the third consecutive quarter, guided first quarter results in-line and reaffirmed its fiscal 2020 outlook for revenue growth acceleration in constant currency.
Total revenue grew 4% in constant currency versus guidance for a 1-3% increase, up from 3% growth in the third quarter. EPS grew 17% to $1.16 versus $1.05-1.09 guidance, but free cash flow missed estimates.
Oracle is far from the flashiest software story. Smaller (but still large cap) cloud competitors like Salesforce (CRM) and Workday (WDAY) have stolen the limelight in recent years, but Oracle is finally starting to get investors excited with accelerating growth.
Oracle is successfully transitioning its legacy ERP business to the cloud, but the outlook for the infrastructure business remains more challenged by competition from public clouds like Amazon's (AMZN) AWS and Microsoft's (MSFT) Azure.
Enterprise software stocks remain on fire and Oracle is one of the cheapest among all of them. With a market value of over $200 bln, the stock trades at ~15x adjusted EPS, ~12x EV/EBITDA and free cash flow estimates. Meanwhile, there are some three dozen hot software stocks trading with a forward revenue multiple in the double digits.
Oracle's acquisitive nature has been relatively subdued since acquiring Netsuite for $9.3 bln three years ago. The company has instead opted to purchase its own stock, where it sees value. The company bought back $36 bln worth of its stock in fiscal 2019, representing ~20% of the shares outstanding.