Which Software Stocks Are Winning the Earnings Game After Oracle’s Release?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here is your Cheat Sheet to how the top 5 software stocks rank via earnings trends:

Microsoft (NASDAQ:MSFT): Current Price $28.26

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 60,420 58,440 62,480 69,940 73,720
Diluted EPS ($) 1.87 1.62 2.10 2.69 2.00

Microsoft did a commendable job increasing both revenue and EPS after 2009, though we are concerned about the dip in EPS in year 2012.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 20,880 17,410 18,060 16,010 21,460
Diluted EPS ($) 0.78 0.60 -0.06 0.53 0.76

After posting a negative EPS quarter in June 2012, Microsoft bounced back with solid improvements in EPS in the next two quarters. It stays on our watch list…