Which infrastructure software stock is a better buy?

With the increasing deployment of enterprise software and services in various industries, the leading companies in this space, Oracle (ORCL) and Adobe (ADBE), are expected to see growing demand for their solutions. But which of these two stocks is a better buy now? Read on to find out.


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Oracle Corporation (ORCL) provides products and services that address enterprise computing environments worldwide. It markets and sells its cloud, licensing, hardware, support and service offerings directly to enterprises. On the other hand, Adobe Inc. (ADBE) operates as a globally diversified software company. It operates through three segments: Digital Media; Digital experience; and publishing and advertising.

With an increasing focus on customer service-oriented strategies and the standardization of the work-from-home model, the demand for enterprise software and services has increased over the past year. Moreover, the rapid increase in the volume of enterprise data and increasing automation of business processes in several end-use industries is expected to drive the growth of the software infrastructure industry. According to Grand View Research, the global enterprise software and services market is expected to grow at a 11.3% CAGR by 2028. Therefore, ORCL and ADBE should benefit.

ORCL has gained 17% over the past year, while ADBE has returned 2.4%. But which of these two stocks is a better buy now? Let’s find out.

Latest developments

On February 14, 2022, ORCL announced new logistics management capabilities within Oracle Fusion Cloud Supply Chain & Manufacturing. Updates to Oracle Fusion Cloud Transportation Management and Oracle Fusion Cloud Global Trade Management can help organizations reduce costs and risks, improve customer experience, and become more resilient to business disruptions, increasing thus his request.

Click here to view our Software Industry Report for 2022

On December 16, 2021, Shantanu Narayen, President and CEO of ADBE, said, “With an estimated addressable market of $205 billion, we are well positioned for significant growth in the years to come with our leading products and platforms. of the sector.

Recent financial results

ORCL’s revenue increased 18% year-over-year to $3.53 billion for the fiscal second quarter ended Nov. 30, 2021. Non-GAAP operating income from the company grew 6% year-over-year to $4.86 billion, while non-GAAP net income was $3.38 billion, an increase of 4 % year over year. Additionally, its non-GAAP EPS was $1.21, up 14% year-over-year.

ADBE’s revenue increased 20% year-over-year to $4.11 billion for the fiscal second quarter ended December 3, 2021. The company’s non-GAAP operating profit increased grew 20.7% year-over-year to $1.86 billion, while its non-GAAP net income reached $1.54 billion, an increase of 12.7 % year over year. Additionally, its non-GAAP EPS was $3.20, up 13.9% year-over-year.

Past and expected financial performance

ORCL’s net income and EPS have grown at CAGRs of 38.9% and 55.1%, respectively, over the past three years. Analysts expect ORCL’s revenue to grow 4.6% in the current year and 4.5% next year. The company’s EPS is expected to grow 3.4% in the current year and 8.7% next year. Additionally, its EPS is expected to grow 9.6% annually over the next five years.

On the other hand, ADBE’s net income and EPS have grown at CAGRs of 23% and 24.4%, respectively, over the past three years. The company’s revenue is expected to grow 13.7% in the current year and 14.9% next year. Its EPS is expected to grow 10.4% for the current year and 18.1% next year. Additionally, ADBE’s EPS is expected to grow 15.4% annually over the next five years.

Profitability

ORCL’s revenue over the past 12 months is 2.62 times what ADBE generates. However, ADBE is also more profitable with gross profit margin and net profit margin of 88.18% and 30.55% compared to ORCL’s 79.96% and 24.79%, respectively.

Furthermore, ADBE’s ROA and ROTC of 14.08% and 19.37% are higher than ORCL’s of 9.20% and 13.46%, respectively.

Evaluation

In non-GAAP terms of the last 12 months PER, ADBE is currently trading at 34.15x, 109.9% higher than ORCL’s 16.27x. Additionally, ADBE’s trailing 12-month EV/EBITDA of 24.91x is 105.9% higher than ORCL’s 12.10x.

So, ORCL is relatively affordable here.

POWR Rankings

ORCL has an overall rating of B, which is equivalent to a purchase in our own POWR Rankings system. On the other hand, ADBE has an overall rating of C, which translates to Neutral. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ORCL has a B rating for Value, consistent with its non-GAAP forward P/E of 16.26x, 17% below the industry average of 19.60x. However, ADBE has a C rating for Value, in line with its forward non-GAAP P/E of 33.27x, 69.8% above the industry average of 19.60x.

Of the 165 shares of Software app industry, ORCL is ranked #16. In comparison, ADBE is ranked #39.

Beyond what I said above, we also rated stocks in terms of quality, growth, momentum, stability and sentiment. Click here to see all ORCL ratings. Also get all ADBE ratings here.

The winner

The increasing scale of operations and rapid migration to cloud is expected to drive the growth of the software infrastructure market. While ORCL and ADBE are both expected to win, it is better to bet on ORCL now due to its lower valuation.

Our research shows that the odds of success increase when investing in stocks with an overall buy or strong buy rating. View all other top rated Software – Applications stocks here.


ADBE shares were trading at $448.86 per share on Friday afternoon, down $10.22 (-2.23%). Year-to-date, ADBE is down -20.84%, compared to a -9.51% rise in the benchmark S&P 500 over the same period.


About the Author: Nimesh Jaiswal

At Nimesh Jaiswal His passionate interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles.

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