Oracle Stock Jumped 11%, Two Alternative Smarter Bets?

If you are an investor in database and cloud computing major Oracle (NYSE:ORCL) and have benefited from the stock’s 11% jump on Tuesday following better-than-expected Q1 FY’25 earnings, it may be time to look elsewhere. As of this moment, we find that Fiserv (NYSE:FI) – a financial technology company – and Barrick Gold (NYSE:GOLD) – a major gold and copper mining company – appear to be more attractive than Oracle stock.

Why? Simply because the valuation and growth numbers tell us so. Fiserv and Barrick Gold stocks have both seen higher growth in revenue and operating profits than Oracle in the last twelve months, as well as the most recent quarter. Not only that, they’re both cheaper than Oracle.

In fact, the strategy of thoughtfully shifting allocation to more attractive stocks is part of our market outperforming Trefis High Quality Portfolio (HQ) – which beat the S&P 500 in 2023 handily despite being meaningfully underweight the magnificent 7. Full HQ performance story here.

Better Buys Than ORCL – FI & GOLD Stocks?

Specifically, to illustrate the opportunity for Fiserv, you pay $18.65 per dollar of earnings-before-interest-and taxes (EBIT) for FI stock versus $26.71 for ORCL, and get higher annual growth (7.2% vs 6.0%), higher quarterly growth (7.4% vs 3.3%), and better margin trend (4.5% vs 4.2%). Overall, you get higher revenue, and operating profit growth from Fiserv and Barrick Gold, and pay less than for ORCL stock.  See our complete dashboard analysis of Better Bets Than ORCL Stock.

So What’s The Catch?

Now, could Oracle buck the trend? Could it grow its revenues and profits much faster than Fiserv or Barrick Gold in the coming quarters? Of course that’s possible. While Oracle is best known as a database software provider, the company has been expanding its cloud infrastructure business competing directly with the likes of Amazon’s AWS and Microsoft’s Azure. Oracle has been positioning its cloud offering to cater to artificial-related workloads and this is proving quite successful. Over the most recently reported quarter, Oracle’s cloud infrastructure business grew revenue by 45% to $2.2 billion, while cloud application revenue rose 10% to $3.5 billion. If this trend continues, Oracle’s top line and margins could expand more quickly.

The data below shows both Fiserv and Barrick Gold outperformed Oracle recently and over the last year. They might repeat this. Related Ideas: Better Buys and Outperformers

Pay Less Per Dollar Of Profit (EBIT) Than Oracle, To Get More Revenue And Profit Growth?

GOLD has seen the strongest revenue growth of the three in the last twelve months, followed by FI. ORCL has seen the slowest growth over the period. Moreover, GOLD and FI have seen higher margin expansion compared to ORCL. However, despite this, ORCL stock trades at a higher price-to-operating income ratio of almost 27x, compared to levels of roughly 11x to 19x for GOLD and FI.

What About Relative Market Returns?

FI stock has shown a strong market performance, with returns of 41% over the past 12 months, and 16% over the past 3 months. In comparison, ORCL returns for the same periods were weaker at 25% and 11%, respectively.

How Did These Metrics Look 1 Year Ago – Could ORCL’s Combination Of Higher Valuation & Lower Growth Persist?

ORCL still had a higher valuation of $24.6 vs $17.8 for FI but higher annual growth (17.7% vs 8.5%), higher quarterly growth (16.86% vs 6.9%), and less favorable margin change (1.1% vs 6.7%). The situation looks a bit different now which means that market reward could switch in favor of FI and GOLD.

Investment Thesis For Fiserv And Barrick Gold 

Fiserv stands to benefit from the ongoing shift toward digital commerce. The company provides technology infrastructure that enables merchants to accept card payments while enabling banks to process transactions and payments. Fiserv provides solutions that include point-of-sale systems, payment processing, e-commerce solutions, and analytics tools. While the company’s traditional strength has been in catering to mid-sized banks, it has increasingly been diversifying to other areas as well. The company generates a bulk of its revenue from account and transaction-based fees, and typically signs on to multi-year contracts with clients giving the company reasonably strong revenue visibility.

Barrick Gold is one of the largest gold mining companies in the world, with a strong portfolio of assets in stable jurisdictions including the United States. The company has been boosting its production and reducing costs. The sentiment toward precious metals prices has also generally been bullish considering the relatively tight supply, multiple geopolitical headwinds, and a move by central banks to diversify their reserves by holding more gold in place of the U.S. Dollar. Separately, Barrick’s move to scale up its copper business could drive an incremental upside for the stock, given its application in a host of futuristic industries including electric vehicles and the renewable energy sector.

Here’s more on Trefis’ market-beating portfolios, including HQ with downside protection.

[1] Returns as of 9/11/2024
[2] Cumulative total returns since the end of 2016

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