Intrinsic value of Oracle - ORCL

Previous Close

$48.74

  Intrinsic Value

$29.52

stock screener

  Rating & Target

sell

-39%

  Value-price divergence*

-71%

Previous close

$48.74

 
Intrinsic value

$29.52

 
Up/down potential

-39%

 
Rating

sell

 
Value-price divergence*

-71%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ORCL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 201.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.84
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  37,728
  38,784
  39,956
  41,241
  42,642
  44,159
  45,793
  47,547
  49,424
  51,427
  53,560
  55,828
  58,234
  60,783
  63,483
  66,337
  69,354
  72,539
  75,899
  79,444
  83,180
  87,116
  91,263
  95,628
  100,223
  105,058
  110,145
  115,496
  121,123
  127,040
  133,260
Variable operating expenses, $m
 
  25,477
  26,117
  26,818
  27,583
  28,411
  29,303
  30,261
  31,286
  32,379
  33,544
  30,477
  31,790
  33,182
  34,656
  36,214
  37,861
  39,599
  41,434
  43,369
  45,408
  47,557
  49,821
  52,204
  54,712
  57,352
  60,129
  63,050
  66,122
  69,352
  72,747
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  25,018
  25,477
  26,117
  26,818
  27,583
  28,411
  29,303
  30,261
  31,286
  32,379
  33,544
  30,477
  31,790
  33,182
  34,656
  36,214
  37,861
  39,599
  41,434
  43,369
  45,408
  47,557
  49,821
  52,204
  54,712
  57,352
  60,129
  63,050
  66,122
  69,352
  72,747
Operating income, $m
  12,710
  13,307
  13,839
  14,423
  15,059
  15,748
  16,490
  17,286
  18,139
  19,048
  20,017
  25,351
  26,443
  27,601
  28,827
  30,123
  31,493
  32,939
  34,465
  36,075
  37,771
  39,559
  41,442
  43,424
  45,510
  47,706
  50,016
  52,446
  55,001
  57,688
  60,512
EBITDA, $m
  15,161
  18,168
  18,716
  19,319
  19,975
  20,685
  21,451
  22,272
  23,152
  24,090
  25,089
  26,151
  27,278
  28,473
  29,737
  31,074
  32,487
  33,979
  35,553
  37,214
  38,964
  40,808
  42,750
  44,795
  46,947
  49,212
  51,595
  54,101
  56,737
  59,509
  62,423
Interest expense (income), $m
  1,612
  1,650
  1,386
  1,454
  1,528
  1,609
  1,696
  1,790
  1,891
  1,999
  2,114
  2,237
  2,368
  2,506
  2,653
  2,809
  2,973
  3,147
  3,330
  3,524
  3,728
  3,943
  4,170
  4,408
  4,660
  4,924
  5,203
  5,496
  5,804
  6,128
  6,469
Earnings before tax, $m
  11,517
  11,658
  12,453
  12,969
  13,531
  14,139
  14,794
  15,496
  16,248
  17,049
  17,902
  23,114
  24,076
  25,095
  26,174
  27,315
  28,520
  29,793
  31,135
  32,551
  34,044
  35,616
  37,272
  39,016
  40,851
  42,782
  44,813
  46,950
  49,197
  51,560
  54,044
Tax expense, $m
  2,182
  3,148
  3,362
  3,502
  3,653
  3,818
  3,994
  4,184
  4,387
  4,603
  4,834
  6,241
  6,500
  6,776
  7,067
  7,375
  7,700
  8,044
  8,407
  8,789
  9,192
  9,616
  10,063
  10,534
  11,030
  11,551
  12,100
  12,676
  13,283
  13,921
  14,592
Net income, $m
  9,335
  8,510
  9,090
  9,467
  9,878
  10,322
  10,800
  11,312
  11,861
  12,446
  13,069
  16,873
  17,575
  18,319
  19,107
  19,940
  20,820
  21,749
  22,729
  23,762
  24,852
  26,000
  27,209
  28,481
  29,821
  31,231
  32,714
  34,273
  35,914
  37,639
  39,452

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  66,078
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  134,991
  70,904
  73,045
  75,396
  77,956
  80,729
  83,717
  86,924
  90,355
  94,017
  97,917
  102,061
  106,460
  111,121
  116,056
  121,275
  126,789
  132,612
  138,756
  145,235
  152,066
  159,262
  166,842
  174,823
  183,223
  192,062
  201,362
  211,144
  221,431
  232,248
  243,619
Adjusted assets (=assets-cash), $m
  68,913
  70,904
  73,045
  75,396
  77,956
  80,729
  83,717
  86,924
  90,355
  94,017
  97,917
  102,061
  106,460
  111,121
  116,056
  121,275
  126,789
  132,612
  138,756
  145,235
  152,066
  159,262
  166,842
  174,823
  183,223
  192,062
  201,362
  211,144
  221,431
  232,248
  243,619
Revenue / Adjusted assets
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
Average production assets, $m
  10,969
  11,286
  11,627
  12,001
  12,409
  12,850
  13,326
  13,836
  14,382
  14,965
  15,586
  16,246
  16,946
  17,688
  18,473
  19,304
  20,182
  21,109
  22,087
  23,118
  24,205
  25,351
  26,557
  27,828
  29,165
  30,572
  32,052
  33,609
  35,247
  36,968
  38,779
Working capital, $m
  50,337
  -6,128
  -6,313
  -6,516
  -6,737
  -6,977
  -7,235
  -7,512
  -7,809
  -8,126
  -8,463
  -8,821
  -9,201
  -9,604
  -10,030
  -10,481
  -10,958
  -11,461
  -11,992
  -12,552
  -13,142
  -13,764
  -14,419
  -15,109
  -15,835
  -16,599
  -17,403
  -18,248
  -19,137
  -20,072
  -21,055
Total debt, $m
  56,929
  39,611
  41,539
  43,654
  45,959
  48,454
  51,143
  54,029
  57,118
  60,413
  63,923
  67,653
  71,612
  75,807
  80,248
  84,945
  89,908
  95,149
  100,678
  106,510
  112,657
  119,134
  125,956
  133,138
  140,698
  148,654
  157,024
  165,828
  175,086
  184,821
  195,056
Total liabilities, $m
  81,131
  63,813
  65,741
  67,856
  70,161
  72,656
  75,345
  78,231
  81,320
  84,615
  88,125
  91,855
  95,814
  100,009
  104,450
  109,147
  114,110
  119,351
  124,880
  130,712
  136,859
  143,336
  150,158
  157,340
  164,900
  172,856
  181,226
  190,030
  199,288
  209,023
  219,258
Total equity, $m
  53,860
  7,090
  7,305
  7,540
  7,796
  8,073
  8,372
  8,692
  9,036
  9,402
  9,792
  10,206
  10,646
  11,112
  11,606
  12,127
  12,679
  13,261
  13,876
  14,524
  15,207
  15,926
  16,684
  17,482
  18,322
  19,206
  20,136
  21,114
  22,143
  23,225
  24,362
Total liabilities and equity, $m
  134,991
  70,903
  73,046
  75,396
  77,957
  80,729
  83,717
  86,923
  90,356
  94,017
  97,917
  102,061
  106,460
  111,121
  116,056
  121,274
  126,789
  132,612
  138,756
  145,236
  152,066
  159,262
  166,842
  174,822
  183,222
  192,062
  201,362
  211,144
  221,431
  232,248
  243,620
Debt-to-equity ratio
  1.057
  5.590
  5.690
  5.790
  5.900
  6.000
  6.110
  6.220
  6.320
  6.430
  6.530
  6.630
  6.730
  6.820
  6.910
  7.000
  7.090
  7.170
  7.260
  7.330
  7.410
  7.480
  7.550
  7.620
  7.680
  7.740
  7.800
  7.850
  7.910
  7.960
  8.010
Adjusted equity ratio
  -0.177
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,335
  8,510
  9,090
  9,467
  9,878
  10,322
  10,800
  11,312
  11,861
  12,446
  13,069
  16,873
  17,575
  18,319
  19,107
  19,940
  20,820
  21,749
  22,729
  23,762
  24,852
  26,000
  27,209
  28,481
  29,821
  31,231
  32,714
  34,273
  35,914
  37,639
  39,452
Depreciation, amort., depletion, $m
  2,451
  4,860
  4,877
  4,896
  4,916
  4,938
  4,961
  4,986
  5,013
  5,042
  5,072
  800
  835
  871
  910
  951
  994
  1,040
  1,088
  1,139
  1,192
  1,249
  1,308
  1,371
  1,437
  1,506
  1,579
  1,656
  1,736
  1,821
  1,910
Funds from operations, $m
  15,350
  13,371
  13,968
  14,363
  14,793
  15,259
  15,760
  16,298
  16,874
  17,488
  18,141
  17,673
  18,410
  19,191
  20,017
  20,891
  21,814
  22,788
  23,817
  24,901
  26,044
  27,248
  28,517
  29,852
  31,258
  32,737
  34,293
  35,929
  37,650
  39,460
  41,362
Change in working capital, $m
  1,224
  -167
  -185
  -203
  -221
  -240
  -258
  -277
  -297
  -316
  -337
  -358
  -380
  -403
  -426
  -451
  -477
  -503
  -531
  -560
  -590
  -622
  -655
  -690
  -726
  -764
  -804
  -845
  -889
  -935
  -983
Cash from operations, $m
  14,126
  13,537
  14,153
  14,566
  15,015
  15,499
  16,019
  16,576
  17,170
  17,804
  18,478
  18,031
  18,790
  19,593
  20,443
  21,342
  22,290
  23,292
  24,348
  25,461
  26,634
  27,870
  29,172
  30,542
  31,984
  33,501
  35,096
  36,775
  38,539
  40,395
  42,345
Maintenance CAPEX, $m
  0
  -540
  -556
  -573
  -591
  -611
  -633
  -656
  -682
  -708
  -737
  -768
  -800
  -835
  -871
  -910
  -951
  -994
  -1,040
  -1,088
  -1,139
  -1,192
  -1,249
  -1,308
  -1,371
  -1,437
  -1,506
  -1,579
  -1,656
  -1,736
  -1,821
New CAPEX, $m
  -2,021
  -318
  -341
  -374
  -408
  -441
  -476
  -510
  -546
  -583
  -621
  -660
  -700
  -742
  -785
  -831
  -878
  -927
  -978
  -1,031
  -1,087
  -1,146
  -1,207
  -1,270
  -1,337
  -1,407
  -1,480
  -1,557
  -1,637
  -1,722
  -1,810
Cash from investing activities, $m
  -21,494
  -858
  -897
  -947
  -999
  -1,052
  -1,109
  -1,166
  -1,228
  -1,291
  -1,358
  -1,428
  -1,500
  -1,577
  -1,656
  -1,741
  -1,829
  -1,921
  -2,018
  -2,119
  -2,226
  -2,338
  -2,456
  -2,578
  -2,708
  -2,844
  -2,986
  -3,136
  -3,293
  -3,458
  -3,631
Free cash flow, $m
  -7,368
  12,679
  13,256
  13,619
  14,016
  14,446
  14,910
  15,409
  15,943
  16,513
  17,120
  16,604
  17,290
  18,017
  18,787
  19,601
  20,462
  21,371
  22,330
  23,342
  24,408
  25,533
  26,717
  27,963
  29,276
  30,657
  32,110
  33,639
  35,246
  36,937
  38,714
Issuance/(repayment) of debt, $m
  13,638
  -7,521
  1,927
  2,116
  2,305
  2,495
  2,689
  2,886
  3,088
  3,296
  3,510
  3,730
  3,959
  4,195
  4,441
  4,697
  4,963
  5,240
  5,530
  5,832
  6,147
  6,477
  6,822
  7,183
  7,560
  7,956
  8,370
  8,804
  9,258
  9,735
  10,235
Issuance/(repurchase) of shares, $m
  -1,663
  1,001
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  11,717
  -6,520
  1,927
  2,116
  2,305
  2,495
  2,689
  2,886
  3,088
  3,296
  3,510
  3,730
  3,959
  4,195
  4,441
  4,697
  4,963
  5,240
  5,530
  5,832
  6,147
  6,477
  6,822
  7,183
  7,560
  7,956
  8,370
  8,804
  9,258
  9,735
  10,235
Total cash flow (excl. dividends), $m
  4,263
  6,160
  15,183
  15,735
  16,321
  16,941
  17,599
  18,295
  19,031
  19,809
  20,630
  20,334
  21,248
  22,212
  23,228
  24,298
  25,425
  26,611
  27,860
  29,173
  30,556
  32,009
  33,538
  35,146
  36,836
  38,613
  40,480
  42,442
  44,504
  46,671
  48,948
Retained Cash Flow (-), $m
  -6,571
  -9,511
  -214
  -235
  -256
  -277
  -299
  -321
  -343
  -366
  -390
  -414
  -440
  -466
  -493
  -522
  -551
  -582
  -614
  -648
  -683
  -720
  -758
  -798
  -840
  -884
  -930
  -978
  -1,029
  -1,082
  -1,137
Prev. year cash balance distribution, $m
 
  56,281
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  52,930
  14,969
  15,500
  16,064
  16,664
  17,300
  17,974
  18,688
  19,442
  20,240
  19,920
  20,808
  21,746
  22,734
  23,776
  24,873
  26,029
  27,245
  28,525
  29,873
  31,290
  32,780
  34,348
  35,996
  37,729
  39,550
  41,464
  43,476
  45,590
  47,811
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  50,748
  13,704
  13,489
  13,227
  12,917
  12,556
  12,143
  11,680
  11,169
  10,611
  9,460
  8,880
  8,268
  7,632
  6,980
  6,321
  5,663
  5,017
  4,392
  3,796
  3,236
  2,720
  2,251
  1,833
  1,468
  1,154
  890
  673
  498
  360
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Oracle Corporation (Oracle) provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company's businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. The Company's services business includes the remainder of the Company's segments. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

FINANCIAL RATIOS  of  Oracle (ORCL)

Valuation Ratios
P/E Ratio 21.6
Price to Sales 5.3
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 14.3
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate 1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 70%
Cap. Spend. - 3 Yr. Gr. Rate 28.4%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 87.5%
Total Debt to Equity 105.7%
Interest Coverage 8
Management Effectiveness
Return On Assets 8.6%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 9.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 19.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 80.2%
Gross Margin - 3 Yr. Avg. 80.1%
EBITDA Margin 41.3%
EBITDA Margin - 3 Yr. Avg. 42.3%
Operating Margin 33.7%
Oper. Margin - 3 Yr. Avg. 34.7%
Pre-Tax Margin 30.5%
Pre-Tax Margin - 3 Yr. Avg. 31.7%
Net Profit Margin 24.7%
Net Profit Margin - 3 Yr. Avg. 24.9%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 21.2%
Payout Ratio 28.2%

ORCL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ORCL stock intrinsic value calculation we used $37728 million for the last fiscal year's total revenue generated by Oracle. The default revenue input number comes from 2017 income statement of Oracle. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ORCL stock valuation model: a) initial revenue growth rate of 2.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ORCL is calculated based on our internal credit rating of Oracle, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Oracle.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ORCL stock the variable cost ratio is equal to 66%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ORCL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Oracle.

Corporate tax rate of 27% is the nominal tax rate for Oracle. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ORCL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ORCL are equal to 29.1%.

Life of production assets of 20.3 years is the average useful life of capital assets used in Oracle operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ORCL is equal to -15.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $53860 million for Oracle - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4140.94 million for Oracle is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Oracle at the current share price and the inputted number of shares is $201.8 billion.

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COMPANY NEWS

▶ How Wall Street Analysts View Oracle Stock   [Sep-19-17 10:36AM  Market Realist]
▶ Why Oracle Stock Fell Last Week   [08:10AM  Market Realist]
▶ Oracles RSI and Volatility after Fiscal 1Q18   [07:36AM  Market Realist]
▶ How to Make Money on Booming Cloud Services Demand   [Sep-18-17 08:00PM  TheStreet.com]
▶ Company News for Sep 18, 2017   [10:17AM  Zacks]
▶ How Oracle Stock Compared to the S&P 500   [09:06AM  Market Realist]
▶ The Biggest Loser: Oracle Tumbles   [05:23PM  Barrons.com]
▶ What Happened in the Stock Market Today   [05:07PM  Motley Fool]
▶ Q3 Earnings Season Gets Underway   [04:58PM  Zacks]
▶ Oracle's Cloud-Computing Guidance Raises Concerns About Growth   [04:18PM  Investor's Business Daily]
▶ Big Data Stock Eyes Breakout On 187% Growth, Q2 Earnings Beat   [04:07PM  Investor's Business Daily]
▶ Oracle's Stock Price Could Suddenly Collapse   [12:56PM  TheStreet.com]
▶ A Slew Of Economic Data   [10:30AM  Zacks]
▶ Oracle shares drop 4 percent after it posts pessimistic guidance   [09:56AM  American City Business Journals]
▶ NYSE: ORCL's Cloud Outlook Sees Shares Fall   [08:08AM  TheStreet.com]
▶ Stock Futures: North Korea Conducts Another Weapons Test   [12:14AM  Investor's Business Daily]
▶ [$$] Oracles Cloud Is a Rainmaker   [12:14AM  The Wall Street Journal]
▶ [$$] Oracles Bet on Cloud Computing Drives Growth   [12:14AM  The Wall Street Journal]
▶ Oracle tops Street 1Q forecasts   [Sep-14-17 09:16PM  Associated Press]
▶ 3 ways to trade Tech   [07:26PM  CNBC Videos]
▶ [$$] Oracle's Bet on Cloud Computing Drives Growth   [07:12PM  The Wall Street Journal]
▶ [$$] Oracle's Cloud Is a Rainmaker   [06:19PM  The Wall Street Journal]
▶ Oracle Earnings Top, But Software Giant Falls On Outlook   [05:34PM  Investor's Business Daily]
▶ Why Oracle Could Advance in the Cloud Space   [10:37AM  Market Realist]
▶ [$$] Oracle Earnings: What to Watch   [06:00AM  The Wall Street Journal]
▶ Oracle Leads 4 Top Stocks In Buy Zones: Investing Action Plan   [04:08PM  Investor's Business Daily]
▶ A Good Time to Be Holding Oracle   [11:53AM  GuruFocus.com]
▶ Could Oracle Follow IBMs Growth Trend?   [09:09AM  Market Realist]
▶ [$$] Oracle Cloud Revenue Could Double   [05:29AM  Barrons.com]
Financial statements of ORCL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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