Which Top 5 Software Stocks Have the Strongest Earnings Trends?

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’s your Cheat Sheet to how the top 5 software stocks rank via earnings trends:

Oracle Corp. (NASDAQ:ORCL): Current Price $34.28

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 22,430 23,250 26,820 35,620 37,120
Diluted EPS ($) 1.06 1.09 1.21 1.67 1.96

Oracle has produced solid growth in revenue and EPS every year after 2008.

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

Quarter Nov. 30, 2011 Feb. 29, 2012 May. 31, 2012 Aug. 31, 2012 Nov. 30, 2012
Revenue ($) in millions 8,792 9,039 10,920 8,181 9,094
Diluted EPS ($) 0.43 0.49 0.68 0.41 0.53

There’s obviously a slowdown in revenue and EPS after May 2012, though we like the rise in the EPS in November 2012. Oracle stays in the reckoning…