Oracle Corporation (ORCL)

Discount cash flow analysis

Sell Overvalued by 38.2%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Oracle Corporation, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2008 2009 2010 2011 2012 2013 2014 2015
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $24.39 $24.01 $23.64
Terminal Growth% 0 $24.53 $24.14 $23.77
  +1% $24.66 $24.27 $23.90

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $59.91 (undervalued by 53.34%) - 12 months ago
  • noura created a new valuation of $25.51 (undervalued by 2.24%) - over 7 years ago
  • noura created a new valuation of $49.52 (undervalued by 139.0%) - almost 8 years ago
  • noura created a new valuation of $49.52 (undervalued by 139.0%) - almost 8 years ago
  • noura created a new valuation of $52.92 (undervalued by 155.41%) - almost 8 years ago
  • laguerriere created a new valuation of $19.62 (overvalued by 4.62%) - 8 years ago
  • SethWellbourne created a new valuation of $21.95 (undervalued by 24.29%) - over 8 years ago
  • GordonGekko created a new valuation of $19.27 (undervalued by 39.13%) - over 8 years ago
  • balli created a new valuation of $18.14 (undervalued by 30.97%) - over 8 years ago
  • balli created a new valuation of $22.53 (undervalued by 62.67%) - over 8 years ago
  • balli created a new valuation of $20.58 (undervalued by 48.59%) - over 8 years ago
  • TheCrunchBlog created a new valuation of $24.14 (undervalued by 12.7%) - over 9 years ago
  • KiwiEMH created a new valuation of $24.66 (undervalued by 9.36%) - over 9 years ago
  • GordonGekko created a new valuation of $21.64 (undervalued by 2.56%) - over 9 years ago
  • silas created a new valuation of $15.43 (overvalued by 28.27%) - over 9 years ago

Comments

Valuing Oracle - Appears Slightly Undervalued

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/06/valuing-oracle-appears-slightly-undervalued/

Oracle grew revenues from US$11.8 billion in 2005 to US$22.4 billion in 2008 – a 24% compound annual growth rate. Our assumptions of revenues for the next three years are US$25.75 billion in 2009 growing to US$31.5 billion in 2011 – a 12% compound annual growth rate. We have projected EBITDA margins to be flat at 40%. We have used a terminal growth rate of 4%. We calculated this terminal growth rate based on year three growth of 8.6% dropping to a 3% stable growth rate by year 10. We used a terminal capital expenditure number of US$600 million. We have used a WACC (discount rate) of 10.5%.

By TheCrunchBlog, about 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 201,463
Net Debt (Long-term borrowings less cash): 193
Equity Value: 110,345
Number of Shares Outstanding: 5,151,000,000
Calculated value per share: $24.14

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.