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The Prophecy for Oracle Is Growth

Oracle's (ORCL - Get Report) profit will easily pay for its shiny new quarterly dividend of 5 cents a share.

Analysts expect the database software giant to increase per-share earnings 32% to $1.40 in the year that ends in May. Next fiscal year, they predict profit to grow 8% to $1.51. Oracle will easily cover the 20-cent annual dividend payout.

Before Oracle surprised investors with its dividend announcement, TheStreet.com Ratings' quantitative model had graded the stock B-minus, a recommendation to "buy." The model analyzes companies' stock prices and financial positions, and the growth expectations of analysts.

Based on those estimates, Oracle is trading at a modest 11 times this year's projected net income and 10 times next year's earnings forecast. The company earned a B-plus "reward grade" from TheStreet.com Ratings, reflecting its growth prospects, low price-to-earnings ratio and ability to generate $7.4 billion in cash flow from $22.4 billion in annual revenue. Volatility in its stock price held its "risk grade" lower at C-minus.

"Buy" recommendations aren't easy to come by these days. The model gave software firms Microsoft (MSFT - Get Report), SAP (SAP - Get Report) and Adobe Systems (ADBE - Get Report) "overall" grades in the C range, which amount to "hold" recommendations. Overall grades for stocks range from A-plus to E-minus, with bankrupt firms earning F grades.

On Wednesday, Oracle said its fiscal third-quarter earnings rose 3% to $0.26 from a year ago. Profit would have climbed 29% if the U.S. dollar hadn't strengthened, devaluing money earned abroad. The company has also been actively buying back stock.
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SYM TRADE IT LAST %CHG
ADBE $81.29 1.30%
MSFT $46.88 1.27%
ORCL $39.65 -0.35%
SAP $71.64 -0.62%
AAPL $122.37 -0.50%

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Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.63 +0.06 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

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