Oracle had a major increase in operating cash flow in 2010, from 8.6 to 11.2 bln. Capex fairly similar at 450 mln. Lots of M&A in the last 6 years (apparently 36 bln).
Currently trading at 141 bln market cap with stock price at 28.21 USD per share. Dont touch unless at 25 (pre crisis peak, a large support here). GMO, Fisher have large positions. Morningstar buy at 28.70.
With FCF no growth estimate of 10 bln, this is a 7% FCF yield. Not bad. Growth is for free with current 30Y US Govt bond yields at 3%. (Note Bestinver FCF mutlipe is x15, i.e. 6.66% FCF yield). Hence will not buy without at least a 7.5% yield.
Now currently trading at much more than pre crisis. Clearly the market believes the M&A it has done is value adding.
Using the database solution as an entry to offer enterprise solutions for software and hardware (bought Sun).
Licence updates are 42% of sales. Hence stable recurring cash flow.
Cloud computing, software as a service solution, such as salesforce.com, and open source software models are all threats. Oracle is taking a wait and see approach. However have bought mySQL, which was an open source solution. Big on M&A in teh future as well.
Like large healthcare companies. Many opportunities come from buying smaller companies and allowing them to grow via using your distribution network. Happening in consumer staples, healthcare, technology. I suppose in industry as well. Buying a new product and putting it through your system. Paying for growth, not being internally generated.
No comments:
Post a Comment