Stock Analysis on Net
Stock Analysis on Net

Oracle Corp. (NYSE:ORCL)

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Oracle Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 22.10%
01 FCFE0 16,525
1 FCFE1 44,389 = 16,525 × (1 + 168.62%) 36,356
2 FCFE2 102,486 = 44,389 × (1 + 130.88%) 68,749
3 FCFE3 197,944 = 102,486 × (1 + 93.14%) 108,754
4 FCFE4 307,615 = 197,944 × (1 + 55.41%) 138,424
5 FCFE5 361,963 = 307,615 × (1 + 17.67%) 133,404
5 Terminal value (TV5) 9,619,281 = 361,963 × (1 + 17.67%) ÷ (22.10% – 17.67%) 3,545,260
Intrinsic value of Oracle Corp. common stock 4,030,948
 
Intrinsic value of Oracle Corp. common stock (per share) $1,399.41
Current share price $152.46

Based on: 10-K (reporting date: 2026-05-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.95%
Expected rate of return on market portfolio2 E(RM) 17.36%
Systematic risk of Oracle Corp. common stock βORCL 1.38
 
Required rate of return on Oracle Corp. common stock3 rORCL 22.10%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rORCL = RF + βORCL [E(RM) – RF]
= 4.95% + 1.38 [17.36% – 4.95%]
= 22.10%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Oracle Corp., PRAT model

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Average May 31, 2026 May 31, 2025 May 31, 2024 May 31, 2023 May 31, 2022 May 31, 2021
Selected Financial Data (US$ in millions)
Common stock dividends 5,725 4,743 4,391 3,668 3,457 3,063
Preferred stock dividends 103 — — — — —
Net income 17,087 12,443 10,467 8,503 6,717 13,746
Revenues 67,357 57,399 52,961 49,954 42,440 40,479
Total assets 261,759 168,361 140,976 134,384 109,297 131,107
Total Oracle Corporation stockholders’ equity (deficit) 42,508 20,451 8,704 1,073 (6,220) 5,238
Financial Ratios
Retention rate1 0.66 0.62 0.58 0.57 0.49 0.78
Profit margin2 25.21% 21.68% 19.76% 17.02% 15.83% 33.96%
Asset turnover3 0.26 0.34 0.38 0.37 0.39 0.31
Financial leverage4 6.16 8.23 16.20 125.24 — 25.03
Averages
Retention rate 0.62
Profit margin 22.24%
Asset turnover 0.34
Financial leverage 36.17
 
FCFE growth rate (g)5 168.62%

Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).

2026 Calculations

1 Retention rate = (Net income – Common stock dividends – Preferred stock dividends) ÷ (Net income – Preferred stock dividends)
= (17,087 – 5,725 – 103) ÷ (17,087 – 103)
= 0.66

2 Profit margin = 100 × (Net income – Preferred stock dividends) ÷ Revenues
= 100 × (17,087 – 103) ÷ 67,357
= 25.21%

3 Asset turnover = Revenues ÷ Total assets
= 67,357 ÷ 261,759
= 0.26

4 Financial leverage = Total assets ÷ Total Oracle Corporation stockholders’ equity (deficit)
= 261,759 ÷ 42,508
= 6.16

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.62 × 22.24% × 0.34 × 36.17
= 168.62%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (439,157 × 22.10% – 16,525) ÷ (439,157 + 16,525)
= 17.67%

where:
Equity market value0 = current market value of Oracle Corp. common stock (US$ in millions)
FCFE0 = the last year Oracle Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Oracle Corp. common stock

FCFE growth rate (g) forecast

Oracle Corp., H-model

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Year Value gt
1 g1 168.62%
2 g2 130.88%
3 g3 93.14%
4 g4 55.41%
5 and thereafter g5 17.67%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 168.62% + (17.67% – 168.62%) × (2 – 1) ÷ (5 – 1)
= 130.88%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 168.62% + (17.67% – 168.62%) × (3 – 1) ÷ (5 – 1)
= 93.14%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 168.62% + (17.67% – 168.62%) × (4 – 1) ÷ (5 – 1)
= 55.41%