Last update on 2024-06-05

Oracle (ORCL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Oracle (ORCL) achieves a Piotroski F-Score of 7/9 for 2023, indicating solid financial health and strong investment potential based on profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 7

We're running Oracle (ORCL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Oracle scored a Piotroski F-Score of 7 out of 9, indicating strong financial health. The company's profitability, as measured by net income and positive cash flow, is solid, showing consistent positive net income over 20 years and CFO figures reaching $17.165 billion in 2023. Oracle's return on assets (ROA) has improved, and its liquidity status is positive, with declining leverage and consistent trends in cash flow surpassing net income. The stability is further supported by a reduction in outstanding shares, suggesting share buybacks. However, Oracle saw a decline in gross margin, posing a concern about cost management, although asset turnover shows increasing efficiency.

Insights for Value Investors Seeking Stable Income

Oracle (ORCL) presents a strong case as a healthy investment based on its robust Piotroski F-Score of 7. The company demonstrates sound profitability, liquidity, and operational efficiency, though caution is warranted regarding the recent drop in gross margin. Overall, Oracle's financials suggest it is worth considering for potential investment. However, investors should keep an eye on how the company manages its costs moving forward.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Oracle (ORCL)

Company has a positive net income?

Net income represents a company’s total earnings, suggesting the company is profitable. Positive net income is essential as it indicates that the company is earning more than it spends. We add 1 point for positive net income as it reflects good profitability.

Oracle (ORCL) has reported a net income of $8,503,000,000 in 2023. This is indeed a positive figure, signifying profitability for the company. Over the last 20 years, Oracle’s net income has varied significantly, with dips and rises. For instance, during the financial crisis and after, in 2011 and 2012, Oracle's net income was around $10 billion, showing strong growth. The lowest recent net income was $3.825 billion in 2018. Despite fluctuations, the long-term trend has seen Oracle maintaining profitability most years. Given the net income is positive in 2023, Oracle scores 1 point here.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the cash generated by a company's core business operations. It's crucial to consider it when analyzing a company's financial health because it indicates the company's ability to generate sufficient cash to maintain and grow its operations.

For Oracle (ORCL), the CFO for 2023 stands at $17.165 billion, which is positive. This is a positive trend, contributing 1 point to the Piotroski Score. Further scrutiny of the CFO trend over the last 20 years reveals a consistent upward trajectory, except for a dip in 2022. For instance, CFO figures have grown from $3.023 billion in 2003 to the current $17.165 billion in 2023. This upward trend underlines Oracle’s robust ability to generate cash from its primary operations, reflecting strong operational performance and good liquidity.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is an indicator of how profitable a company is relative to its total assets. It is important because it provides insights into how effectively management is utilizing the company's assets to generate earnings.

For Oracle's (ORCL) ROA, the figure increased from 0.0559 in 2022 to 0.0698 in 2023. This positive change means the company has improved in generating earnings from its assets, adding 1 point according to the Piotroski score criteria. This uptick may be indicative of more efficient asset utilization or potentially better operational management. Considering the last 20 years historical data, Oracle shows a consistent performance relative to the industry median which fluctuated between a range of 0.57 to 0.76. While Oracle's ROA remains below the industry median of 0.715 for 2023, the trend of rising ROA is a positive sign for investors, indicating improvement in operational efficiency or asset utilization.

Operating Cashflow are higher than Netincome?

Positive cash flow from operations exceeding net income is crucial as it indicates the company's ability to generate sufficient cash to fund operations, pay dividends, and service debt, demonstrating strong operational health.

In 2023, Oracle (ORCL) shows an operating cash flow of $17.165 billion compared to a net income of $8.503 billion. This results in a considerable difference of $8.662 billion, as the operating cash flow is more than twice the net income. Such a positive indicator merits a score of 1, corroborating a robust scenario where the inflow from operations sufficiently covers the net income, bolstering Oracle's operational credibility. An evaluation of the historical data over the last 20 years reveals that Oracle consistently maintained this trend, barring few fluctuations, thus, reinforcing the firm's financial stability and operational competence.

Liquidity of Oracle (ORCL)

Leverage is declining?

Change in leverage refers to the shift in a company's financial structure, measured by the debt to equity ratio. It is important as it reflects financial risk and stability.

Oracle's (ORCL) leverage has decreased from 0.6598 in 2022 to 0.6431 in 2023, reflecting a slight reduction in financial risk and improved financial stability. This positive trend adds 1 point under the Piotroski F-Score. The historical context shows that leverage has been on a general upward trend over the past 20 years, only to see a recent minor correction which might indicate a strategic shift in Oracle's financial policy. This reduction in leverage is good, signaling more prudent use of debt.

Current Ratio is growing?

Why should investors consider changes in current ratio?

The current ratio is critical for assessing a company’s short-term liquidity and ability to cover its short-term liabilities with its short-term assets. A current ratio higher than 1 indicates that the company has more short-term assets than liabilities, which is considered a sign of sound financial health.

Number of shares not diluted?

Change in Shares Outstanding for Oracle (ORCL) refers to the difference in the number of the company’s stock that is currently held by all its shareholders. It is important to consider as it impacts earnings per share (EPS), dilution, and reflects buyback activities.

The Outstanding Shares for Oracle (ORCL) have slightly decreased from 2,700,000,000 in 2022 to 2,696,000,000 in 2023. Therefore, we assign 1 point as Outstanding Shares have declined. This trend is generally positive as it implies Oracle has possibly engaged in share buybacks, hence reducing dilution and potentially increasing the value of remaining shares. Reviewing the historical trend, Oracle’s outstanding shares have been decreasing sharply since 2009 from 5,138,000,000 to 2,696,000,000. This alignment with lower outstanding shares supports better EPS and often indicates strong financial health and confidence in the company’s future.

Operating of Oracle (ORCL)

Cross Margin is growing?

Change in Gross Margin represents the percentage change in a company's revenue after accounting for the cost of goods sold. It is a critical measure in evaluating a firm's efficiency in controlling production costs and its overall profitability.

Oracle's Gross Margin decreased from 0.7908 in 2022 to 0.7285 in 2023. This 6.26% decline indicates that Oracle's cost of goods sold relative to its revenue has increased, potentially posing concerns about its cost management efficiency and overall profitability. Comparatively, for the industry median, the gross margin for 2023 is 0.715, which also reveals a less favorable position for Oracle as its margin has decreased to be close to the industry median after maintaining a higher margin for many years. Historical data shows that Oracle's gross margins have been consistently higher than the industry median over the last two decades, except in 2023. The current downward trend might suggest cost pressures or pricing strategy adjustments that investors should closely monitor.

Asset Turnover Ratio is growing?

The asset turnover ratio measures a company's efficiency in utilizing its assets to generate sales. It is calculated by dividing net sales by average total assets.

Oracle's asset turnover increased from 0.3531 in 2022 to 0.41 in 2023, demonstrating a rising trend. This means Oracle is improving its efficiency at generating sales from its assets, which is a positive development. This criterion is important because it suggests better management and utilization of assets to drive revenue growth. Historically, the trend since 2003 shows a general decline in asset turnover, with 2023 marking a notable recovery. As the turnover improved in 2023, we add 1 point.