Momentum Meets Value: Oracle Stock’s Next Leg Could Be Higher
Oracle (ORCL) stock might be a good candidate to ride the momentum. Why? Because you get strong margin, low-debt capital structure, reasonable valuation, and strong momentum. Here is some data.
- Revenue Growth: Oracle saw revenue growth of 9.7% LTM and 10.2% last 3 year average.
- Long-Term Profitability: About 35.6% operating cash flow margin and 30.3% operating margin last 3 year average.
- Strong Momentum: Currently in top 10 percentile of stocks in terms of “trend strength” – our proprietary momentum metric.
- Room To Run: Despite its momentum, ORCL stock is trading 13% below its 52-week high.
While revenue growth helps, this selection is all about riding momentum with quality – which we judge by margins (reflective of pricing power / strong business model) and capital structure (not too debt heavy).
As a quick background, Oracle provides cloud software as a service, industry-specific cloud solutions, application licenses, license support, an enterprise database, a development language, and middleware services.
| ORCL | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| PS Ratio | 13.6 | 3.2 |
| PE Ratio | 64.6 | 23.9 |
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| LTM* Revenue Growth | 9.7% | 5.2% |
| 3Y Average Annual Revenue Growth | 10.2% | 5.3% |
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| LTM* Operating Margin | 31.6% | 18.6% |
| 3Y Average Operating Margin | 30.3% | 17.8% |
| LTM* Op Cash Flow Margin | 36.5% | 20.3% |
| 3Y Average Op Cash Flow Margin | 35.6% | 19.8% |
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| DE Ratio | 13.1% | 21.0% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell ORCL Stock to see if Oracle still has an edge that holds up under the hood.
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure.
Stocks Like These Can Outperform. Here Is Data
Here is how we make the selection: We consider stocks with > $2 Bil in market cap, high operating and cfo (cash flow from operations) margin, no instance of more than 15% revenue decline in the past 5 years, reasonable valuation, low-debt capital structure, and strong momentum as defined by our proprietry momentum metric.
Below are statistics for stocks with this selection strategy applied between 12/31/2016 and 6/30/2025.
- Average 12-month forward returns of nearly 15%
- 12-month win rate (percentage of picks returning positive) of about 60%
But Consider The Risk
That said, Oracle isn’t immune to big drops. It plunged nearly 77% in the Dot-Com Bubble and slid over 41% during the Global Financial Crisis. The Inflation Shock wasn’t kind either, with a 40% dip. Even the smaller events — 2018 Correction and Covid Pandemic — pushed it down around 19% and 29% respectively. Solid fundamentals matter, but when sell-offs hit, Oracle can see serious pullbacks.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.