Oracle's (ORCL 0.22%) latest earnings report impressed investors on Dec. 12. For the second quarter of fiscal 2023, which ended on Nov. 30, revenues rose 18% year over year (25% in constant currency terms) to $12.3 billion and beat analysts' estimates by $260 million. Its adjusted earnings per share stayed flat at $1.21 but also cleared the consensus forecast by four cents.

Oracle's stock rose after the report but remains down more than 20% over the past 12 months. It still looks cheap at 16 times forward earnings and pays a decent forward dividend yield of 1.6%, but is it actually a good bear market buy?

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Reviewing Oracle's cloud-based transformation

Oracle was once considered an aging tech company that generated anemic growth from its on-site database software and hardware products. But over the past several years it transformed its on-premise software into cloud-based services, the database giant accelerated that evolution with big acquisitions (most notably NetSuite in 2016), and it expanded its ecosystem of cloud-based enterprise resource planning (ERP) services to lock in its customers.

That transformation enabled Oracle to generate stable sales growth again. After declining 1% in fiscal 2020, its revenue rose 4% in fiscal 2021 and increased another 5% in fiscal 2022 (which ended on May 31). That acceleration was consistently driven by the double-digit growth of its cloud-based infrastructure, Fusion ERP, and Netsuite ERP services, which all offset the slower growth of its legacy on-premise software and hardware products.

Oracle's growth is still accelerating organically

This June, Oracle acquired Cerner for $28 billion to expand its presence in the healthcare IT market. That acquisition caused its reported revenues to rise 18% year over year in both the first and second quarters of fiscal 2023.

On an organic constant currency basis, which excludes Cerner and the impact of the strong dollar, Oracle's revenue still increased 8% in the first quarter and 9% in the second quarter. Its remaining performance obligations (RPO), or the revenue it hasn't recognized from its existing contracts yet, also rose 28% on an organic constant currency basis in the second quarter and accelerated from its 22% growth in the first quarter. It accomplished that even though its exit from Russia reduced its revenue growth by about a percentage point during both quarters.

That robust organic growth indicates that Oracle's core business remains better insulated from the macroeconomic headwinds than many of its peers. For the full year, the company expects its cloud revenue to grow more than 30% in organic constant currency terms, compared to its 22% growth in fiscal 2022.

For the third quarter, Oracle expects its revenue to rise 17%-19% year over year on a reported basis and 21%-23% in constant currency terms. It didn't provide a precise outlook for its organic growth.

A "trough year" for its operating margins

Oracle's top-line growth looks stable, but its margins have been squeezed by its growing mix of lower-margin cloud services and its integration of Cerner. Its adjusted operating margin fell two percentage points to 47% in fiscal 2022, then slipped to 40% in the first half of fiscal 2023. But during Oracle's latest conference call, CEO Safra Catz predicted fiscal 2023 would be the "trough year" for its operating margins as it cuts costs at Cerner and "economies of scale" kick in for its cloud services.

That statement might remind investors of Microsoft (MSFT 0.37%), which also saw its operating margins drop to a multi-year trough in 2016 as CEO Satya Nadella executed his "mobile first, cloud first" turnaround strategy. However, Microsoft's operating margins bounced back -- and its stock more than quadrupled over the past five years as those efforts paid off.

Meanwhile, Oracle's trailing 12-month free cash flow (FCF) still rose 18% year over year to $8.4 billion in the second quarter, which easily covered its $2.2 billion in buybacks and $3.4 billion in dividend payments over the past four quarters. It also ended the second quarter with $7.4 billion in cash and marketable securities, which makes it an attractive safe haven play as rising interest rates continue to punish unprofitable companies with poor liquidity.

Is it the right time to buy Oracle?

Analysts expect Oracle's reported revenue and adjusted EPS to increase 16% and 1%, respectively, in fiscal 2023. In fiscal 2024, they expect its revenue and adjusted earnings to grow 7% and 14%, respectively, as it laps its acquisition of Cerner.

We should take those estimates with a grain of salt, but Oracle's robust growth over the past three years indicates it's gradually evolving into a higher-growth cloud company like Microsoft. The company might not replicate Microsoft's multibagger gains anytime soon, but I believe its stable growth, strong balance sheet, forward-thinking strategies, and low valuations all make Oracle a great stock to buy as macro headwinds continue to rattle the tech sector.