Intrinsic value of Oracle - ORCL

Previous Close

$48.46

  Intrinsic Value

$48.84

stock screener

  Rating & Target

hold

+1%

Previous close

$48.46

 
Intrinsic value

$48.84

 
Up/down potential

+1%

 
Rating

hold

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  37,728
  38,483
  39,368
  40,379
  41,515
  42,774
  44,155
  45,659
  47,286
  49,040
  50,922
  52,936
  55,084
  57,371
  59,803
  62,382
  65,116
  68,010
  71,070
  74,304
  77,718
  81,320
  85,119
  89,124
  93,343
  97,787
  102,465
  107,390
  112,572
  118,024
  123,758
Variable operating expenses, $m
 
  25,297
  25,762
  26,294
  26,891
  27,552
  28,278
  29,068
  29,924
  30,846
  31,835
  27,820
  28,950
  30,152
  31,429
  32,785
  34,222
  35,743
  37,351
  39,050
  40,845
  42,738
  44,735
  46,839
  49,057
  51,392
  53,851
  56,439
  59,163
  62,028
  65,042
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
  25,297
  25,762
  26,294
  26,891
  27,552
  28,278
  29,068
  29,924
  30,846
  31,835
  27,820
  28,950
  30,152
  31,429
  32,785
  34,222
  35,743
  37,351
  39,050
  40,845
  42,738
  44,735
  46,839
  49,057
  51,392
  53,851
  56,439
  59,163
  62,028
  65,042
Operating income, $m
  12,710
  13,186
  13,605
  14,085
  14,624
  15,222
  15,877
  16,590
  17,362
  18,194
  19,087
  25,115
  26,134
  27,220
  28,373
  29,597
  30,894
  32,267
  33,719
  35,253
  36,873
  38,582
  40,384
  42,284
  44,286
  46,395
  48,614
  50,951
  53,409
  55,996
  58,717
EBITDA, $m
  15,161
  23,338
  23,874
  24,488
  25,177
  25,940
  26,778
  27,690
  28,677
  29,740
  30,882
  32,103
  33,405
  34,793
  36,267
  37,831
  39,489
  41,244
  43,100
  45,061
  47,132
  49,316
  51,620
  54,049
  56,607
  59,302
  62,140
  65,126
  68,269
  71,575
  75,053
Interest expense (income), $m
  1,612
  2,598
  2,676
  2,767
  2,870
  2,986
  3,115
  3,256
  3,409
  3,576
  3,755
  3,947
  4,152
  4,372
  4,606
  4,854
  5,117
  5,397
  5,692
  6,005
  6,335
  6,684
  7,051
  7,440
  7,849
  8,279
  8,733
  9,211
  9,714
  10,243
  10,800
Earnings before tax, $m
  11,517
  10,587
  10,929
  11,319
  11,754
  12,235
  12,762
  13,334
  13,953
  14,619
  15,333
  21,168
  21,982
  22,848
  23,768
  24,743
  25,777
  26,871
  28,027
  29,248
  30,538
  31,898
  33,333
  34,845
  36,438
  38,115
  39,881
  41,740
  43,695
  45,753
  47,917
Tax expense, $m
  2,182
  2,859
  2,951
  3,056
  3,174
  3,304
  3,446
  3,600
  3,767
  3,947
  4,140
  5,715
  5,935
  6,169
  6,417
  6,681
  6,960
  7,255
  7,567
  7,897
  8,245
  8,613
  9,000
  9,408
  9,838
  10,291
  10,768
  11,270
  11,798
  12,353
  12,937
Net income, $m
  9,335
  7,729
  7,978
  8,263
  8,581
  8,932
  9,316
  9,734
  10,186
  10,672
  11,193
  15,453
  16,047
  16,679
  17,350
  18,063
  18,817
  19,615
  20,460
  21,351
  22,293
  23,286
  24,333
  25,437
  26,600
  27,824
  29,113
  30,470
  31,898
  33,399
  34,979

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
  95,019
  97,204
  99,702
  102,507
  105,615
  109,024
  112,737
  116,757
  121,087
  125,734
  130,705
  136,010
  141,658
  147,661
  154,030
  160,780
  167,926
  175,482
  183,466
  191,895
  200,790
  210,171
  220,058
  230,476
  241,448
  253,001
  265,160
  277,956
  291,417
  305,576
Adjusted assets (=assets-cash), $m
  68,913
  95,019
  97,204
  99,702
  102,507
  105,615
  109,024
  112,737
  116,757
  121,087
  125,734
  130,705
  136,010
  141,658
  147,661
  154,030
  160,780
  167,926
  175,482
  183,466
  191,895
  200,790
  210,171
  220,058
  230,476
  241,448
  253,001
  265,160
  277,956
  291,417
  305,576
Revenue / Adjusted assets
  0.547
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
Average production assets, $m
  10,969
  50,797
  51,965
  53,301
  54,800
  56,462
  58,284
  60,269
  62,418
  64,733
  67,217
  69,875
  72,711
  75,730
  78,939
  82,345
  85,953
  89,773
  93,813
  98,081
  102,587
  107,342
  112,357
  117,643
  123,213
  129,078
  135,254
  141,755
  148,595
  155,792
  163,361
Working capital, $m
  50,337
  -308
  -315
  -323
  -332
  -342
  -353
  -365
  -378
  -392
  -407
  -423
  -441
  -459
  -478
  -499
  -521
  -544
  -569
  -594
  -622
  -651
  -681
  -713
  -747
  -782
  -820
  -859
  -901
  -944
  -990
Total debt, $m
  56,929
  49,562
  51,236
  53,150
  55,298
  57,679
  60,291
  63,135
  66,214
  69,530
  73,090
  76,898
  80,962
  85,288
  89,886
  94,765
  99,936
  105,409
  111,197
  117,313
  123,770
  130,583
  137,769
  145,343
  153,323
  161,727
  170,577
  179,891
  189,692
  200,004
  210,849
Total liabilities, $m
  81,131
  72,784
  74,458
  76,372
  78,520
  80,901
  83,513
  86,357
  89,436
  92,752
  96,312
  100,120
  104,184
  108,510
  113,108
  117,987
  123,158
  128,631
  134,419
  140,535
  146,992
  153,805
  160,991
  168,565
  176,545
  184,949
  193,799
  203,113
  212,914
  223,226
  234,071
Total equity, $m
  53,860
  22,234
  22,746
  23,330
  23,987
  24,714
  25,512
  26,381
  27,321
  28,334
  29,422
  30,585
  31,826
  33,148
  34,553
  36,043
  37,623
  39,295
  41,063
  42,931
  44,904
  46,985
  49,180
  51,494
  53,931
  56,499
  59,202
  62,048
  65,042
  68,192
  71,505
Total liabilities and equity, $m
  134,991
  95,018
  97,204
  99,702
  102,507
  105,615
  109,025
  112,738
  116,757
  121,086
  125,734
  130,705
  136,010
  141,658
  147,661
  154,030
  160,781
  167,926
  175,482
  183,466
  191,896
  200,790
  210,171
  220,059
  230,476
  241,448
  253,001
  265,161
  277,956
  291,418
  305,576
Debt-to-equity ratio
  1.057
  2.230
  2.250
  2.280
  2.310
  2.330
  2.360
  2.390
  2.420
  2.450
  2.480
  2.510
  2.540
  2.570
  2.600
  2.630
  2.660
  2.680
  2.710
  2.730
  2.760
  2.780
  2.800
  2.820
  2.840
  2.860
  2.880
  2.900
  2.920
  2.930
  2.950
Adjusted equity ratio
  -0.177
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,335
  7,729
  7,978
  8,263
  8,581
  8,932
  9,316
  9,734
  10,186
  10,672
  11,193
  15,453
  16,047
  16,679
  17,350
  18,063
  18,817
  19,615
  20,460
  21,351
  22,293
  23,286
  24,333
  25,437
  26,600
  27,824
  29,113
  30,470
  31,898
  33,399
  34,979
Depreciation, amort., depletion, $m
  2,451
  10,152
  10,269
  10,402
  10,552
  10,719
  10,901
  11,099
  11,314
  11,546
  11,794
  6,987
  7,271
  7,573
  7,894
  8,234
  8,595
  8,977
  9,381
  9,808
  10,259
  10,734
  11,236
  11,764
  12,321
  12,908
  13,525
  14,175
  14,860
  15,579
  16,336
Funds from operations, $m
  15,350
  17,881
  18,247
  18,665
  19,133
  19,650
  20,217
  20,834
  21,500
  22,218
  22,987
  22,440
  23,318
  24,252
  25,244
  26,297
  27,412
  28,593
  29,841
  31,159
  32,551
  34,020
  35,569
  37,201
  38,921
  40,732
  42,639
  44,645
  46,757
  48,979
  51,315
Change in working capital, $m
  1,224
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -46
Cash from operations, $m
  14,126
  17,887
  18,254
  18,673
  19,142
  19,660
  20,228
  20,846
  21,513
  22,232
  23,002
  22,456
  23,335
  24,270
  25,264
  26,318
  27,434
  28,616
  29,865
  31,185
  32,579
  34,049
  35,599
  37,233
  38,955
  40,767
  42,676
  44,685
  46,799
  49,022
  51,361
Maintenance CAPEX, $m
  0
  -4,979
  -5,080
  -5,197
  -5,330
  -5,480
  -5,646
  -5,828
  -6,027
  -6,242
  -6,473
  -6,722
  -6,987
  -7,271
  -7,573
  -7,894
  -8,234
  -8,595
  -8,977
  -9,381
  -9,808
  -10,259
  -10,734
  -11,236
  -11,764
  -12,321
  -12,908
  -13,525
  -14,175
  -14,860
  -15,579
New CAPEX, $m
  -2,021
  -1,011
  -1,168
  -1,336
  -1,499
  -1,661
  -1,823
  -1,985
  -2,149
  -2,315
  -2,484
  -2,658
  -2,836
  -3,019
  -3,209
  -3,405
  -3,609
  -3,820
  -4,040
  -4,268
  -4,507
  -4,755
  -5,015
  -5,286
  -5,569
  -5,866
  -6,176
  -6,501
  -6,840
  -7,196
  -7,569
Cash from investing activities, $m
  -21,494
  -5,990
  -6,248
  -6,533
  -6,829
  -7,141
  -7,469
  -7,813
  -8,176
  -8,557
  -8,957
  -9,380
  -9,823
  -10,290
  -10,782
  -11,299
  -11,843
  -12,415
  -13,017
  -13,649
  -14,315
  -15,014
  -15,749
  -16,522
  -17,333
  -18,187
  -19,084
  -20,026
  -21,015
  -22,056
  -23,148
Free cash flow, $m
  -7,368
  11,897
  12,006
  12,141
  12,313
  12,519
  12,759
  13,032
  13,337
  13,675
  14,045
  13,077
  13,512
  13,980
  14,482
  15,018
  15,591
  16,201
  16,849
  17,536
  18,264
  19,035
  19,850
  20,711
  21,621
  22,580
  23,592
  24,659
  25,783
  26,966
  28,212
Issuance/(repayment) of debt, $m
  13,638
  1,450
  1,674
  1,914
  2,148
  2,380
  2,612
  2,844
  3,079
  3,317
  3,560
  3,808
  4,063
  4,326
  4,598
  4,879
  5,171
  5,473
  5,788
  6,116
  6,457
  6,813
  7,185
  7,574
  7,980
  8,405
  8,849
  9,314
  9,801
  10,311
  10,846
Issuance/(repurchase) of shares, $m
  -1,663
  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 from financing (excl. dividends), $m  
  11,717
  1,450
  1,674
  1,914
  2,148
  2,380
  2,612
  2,844
  3,079
  3,317
  3,560
  3,808
  4,063
  4,326
  4,598
  4,879
  5,171
  5,473
  5,788
  6,116
  6,457
  6,813
  7,185
  7,574
  7,980
  8,405
  8,849
  9,314
  9,801
  10,311
  10,846
Total cash flow (excl. dividends), $m
  4,263
  13,348
  13,680
  14,055
  14,461
  14,900
  15,371
  15,876
  16,416
  16,992
  17,604
  16,885
  17,575
  18,306
  19,080
  19,898
  20,762
  21,674
  22,637
  23,652
  24,721
  25,848
  27,036
  28,285
  29,601
  30,985
  32,441
  33,973
  35,584
  37,278
  39,058
Retained Cash Flow (-), $m
  -6,571
  -477
  -511
  -585
  -656
  -727
  -798
  -869
  -940
  -1,013
  -1,087
  -1,163
  -1,241
  -1,322
  -1,405
  -1,490
  -1,580
  -1,672
  -1,768
  -1,868
  -1,973
  -2,081
  -2,195
  -2,314
  -2,438
  -2,568
  -2,703
  -2,845
  -2,994
  -3,150
  -3,313
Prev. year cash balance distribution, $m
 
  32,103
  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
 
  1,358
  1,385
  1,417
  1,454
  1,495
  1,540
  1,590
  1,644
  1,702
  1,765
  1,833
  1,906
  1,983
  2,065
  2,153
  2,246
  2,344
  2,448
  2,559
  2,675
  2,798
  2,928
  3,064
  3,208
  3,360
  3,520
  3,689
  3,866
  4,053
  4,249
Cash available for distribution, $m
 
  44,973
  13,169
  13,470
  13,805
  14,172
  14,573
  15,007
  15,476
  15,979
  16,517
  15,722
  16,334
  16,984
  17,675
  18,407
  19,182
  20,002
  20,868
  21,783
  22,749
  23,767
  24,841
  25,972
  27,163
  28,418
  29,738
  31,128
  32,590
  34,128
  35,745
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
 
  43,119
  12,056
  11,723
  11,367
  10,985
  10,576
  10,139
  9,673
  9,179
  8,659
  7,466
  6,970
  6,458
  5,934
  5,404
  4,875
  4,352
  3,843
  3,354
  2,891
  2,458
  2,061
  1,702
  1,383
  1,105
  868
  668
  504
  373
  269
Current shareholders' claim on cash, %
  100
  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
  100.0

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 21.5
Price to Sales 5.3
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow 16.6
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% 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 5.4% 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 3.6%.

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 132%.

Life of production assets of 10 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 -0.8%. 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 4115 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 $199.4 billion.

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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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