Filing Flows › Companies › Oracle › Analysis traps
Oracle (ORCL): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q1 FY27, to Aug 31, 2026, filed Sep 11, 2026; rules v1.1
Oracle (ORCL): 1 rule of 10 triggered on the filings to Aug 31, 2026: stock compensation added back = no economic cost. 2 to review; 2 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $4.8B, 7.1% of revenue, in FY26; buybacks were $95M (0.0× the SBC) and the diluted share count still rose 1.7%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
Low P/E at a cyclical peak = undervalued To review · confidence medium
Net income of $18.8B is at a high against a median of $11.1B over eight years; at 18.5× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (31.4×).
A precise DCF value = the true value To review · confidence high
The DCF's point value is 0.97 a share (price 116.10). Moving operating margin by ±3 pts alone takes it from -7.02 to 8.96; across every method the research ran the range is -66 to 455. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence high
Free cash flow did not rise (−$394M → −$23.7B): the trap does not arise.
The figures and how they are read
| Fiscal year before | FY25 |
| Fiscal year | FY26 |
| Operating cash flow, year before | $20.8B |
| Operating cash flow | $32.0B |
| Capex, year before | $21.2B |
| Capex | $55.7B |
| Free cash flow, year before | −$394M |
| Free cash flow | −$23.7B |
| Change in FCF | −$23.3B |
| Change in capex | $34.4B |
| Working capital: change in its cash contribution | $993M |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $4.8B, 7.1% of revenue, in FY26; buybacks were $95M (0.0× the SBC) and the diluted share count still rose 1.7%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY26 |
| Stock compensation | $4.8B |
| Revenue | $67.4B |
| SBC / revenue | +7.1% |
| Buybacks | $95M |
| Buybacks / SBC | 0.0 |
| Diluted shares, year before | 2,866.0M shares |
| Diluted shares | 2,914.0M shares |
| Diluted shares: change | +1.7% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 29% against revenue 30% in Q1 FY27; DSO 52 against a median of 52: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q1 FY27 |
| Revenue, year over year | +29.6% |
| Receivables, year over year | +28.8% |
| Quarter before | Q4 FY26 |
| Revenue y/y, quarter before | +20.6% |
| Receivables y/y, quarter before | +21.3% |
| Days sales outstanding | 51.8 |
| DSO, median of eight quarters | 51.8 |
| Receivables | $11.4B |
| Revenue | $19.3B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q1 FY27 (receivables and revenue) · Q1 FY26 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
$7.2B comes due within a year, 5.1× covered by cash and investments of $37.1B.
The figures and how they are read
| Cash and investments | $37.1B |
| Debt | $7.2B |
| Net debt | −$29.9B |
| Due within a year | $7.2B |
| Read from | the debt maturity table |
| Free cash flow, twelve months | −$28.7B |
| Cash plus free cash flow | $37.1B |
| Coverage of what is due | 5.1 |
| Due in the second year | $10.1B |
| Balance sheet date | 2026-08-31 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Insufficient data
no quarter with EPS, net income and diluted shares for both this year and last
E02 Low P/E at a cyclical peak = undervalued To review confidence medium
Net income of $18.8B is at a high against a median of $11.1B over eight years; at 18.5× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (31.4×).
The figures and how they are read
| market value | $348.3B |
| net income ttm | $18.8B |
| pe ttm | 18.50 |
| net income median fy | $11.1B |
| pe mid cycle | 31.40 |
| net income peak fy | $17.1B |
| years | FY19 / 11083.0; FY20 / 10135.0; FY21 / 13746.0; FY22 / 6717.0; FY23 / 8503.0; FY24 / 10467.0; FY25 / 12443.0; FY26 / 17087.0 |
| down years in window | 2 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q1 FY27 (net income, trailing twelve months)
What would show the trap does not apply
- Profit holds at this level through the next two years (the eight-year peak was a new base, not a top)
- The industry's capacity and prices stay where they are rather than reverting
Look again: next filing.
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 0.97 a share (price 116.10). Moving operating margin by ±3 pts alone takes it from -7.02 to 8.96; across every method the research ran the range is -66 to 455. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 0.97 |
| price | 116.10 |
| terminal value share | — |
| swing by input | Operating margin / ±3 pts / -7.02 / 8.96; WACC / ±1 pt / -5.23 / 9.07; Tax rate / ±5 pts / -5.35 / 7.29; Revenue growth (each year) / ±5 pts / -3.38 / 6.75 |
| range all methods | -66.04; 455.24 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Oracle: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.