Martha Stewart today said she's ready to do her time and just get her "nightmare" over with. She'll continue her appeal but hopes to begin serving her five-month prison sentence and put the ImClone Systems(Nasdaq: IMCL) trading scandal behind her. "I must reclaim my good life, and I must return to my good works," she said.

No doubt, Martha. Stay on the straight and narrow now. In fact, you may not even want to read today's Motley Fool Take because we've got all kinds of vices -- cheap Coke, Tasers for the masses, and five stocks you'd be tempted to get your hot little hands on.

In today's Motley Fool Take:

Another Case for OracleSoft

By

Tim Beyers



When I bought shares of Oracle(Nasdaq: ORCL) last week, my thesis was that the company would continue growing its cash flows substantially, boosting enterprise value and, therefore, per-share value by at least 40% over the next three years. And I thought there was ample evidence Oracle's cash flows would get even richer with an acquisition of business software maker PeopleSoft(Nasdaq: PSFT).

What I didn't know is just how much the database king needs PeopleSoft.

In reporting first-quarter fiscal 2005 earnings yesterday, Oracle said new applications sales were down to $69 million from $107 million during the same period a year ago. Executives explained the shortfall by saying a number of deals expected to close would now be completed in the second quarter.

But that poor showing couldn't put a damper on an otherwise strong performance. Revenue rose 7% from last year to $2.22 billion, and net income climbed 16% to $509 million. Structural free cash flow once again was higher than net income, rising 24% to $528 million.

The good news for Oracle is that the results make the most compelling argument yet for an "OracleSoft" combination. PeopleSoft has seen its net income deteriorate in recent quarters, and Oracle's applications business clearly needs the boost.

Moreover, with cash flows growing as they are, Oracle can easily afford the $7.7 billion price tag it's proposing for PeopleSoft. Yet even with a decisive court victory over the Justice Department, Oracle still has several hurdles to clear before it can close a deal for PeopleSoft, including possible opposition from the European Commission, as well as two civil trials.

The wrangling is worth it, however. All indications are that Oracle would do better as OracleSoft. And that's saying something, for like Motley Fool Stock Advisor pick Dell(Nasdaq: DELL), Oracle seems to get financially stronger with each quarter. Indeed, management said it is comfortable with guidance that pegs next quarter's sales at $2.58 billion to $2.66 billion, an increase of at least 3% over last year's $2.498 billion in second-quarter revenue. Net income is also expected to be up at least a penny from last year.

No wonder Oracle shares are up nearly 7% today. For a tech market in which earnings disappointments from heavies such as Intel(Nasdaq: INTC) have become common, Oracle's prediction of continued strength feels a little like an oasis in the desert.

For more Fool coverage of Oracle:

Fool contributor Tim Beyers owns shares of Oracle. You can view his Fool profile here.

Discussion Board of the Day: Cheap Air Fares

Which sites do you use when you need to book a flight or a room fast and at the best rate possible? What would draw you over to a lodging operator's own site? All this and more in the Cheap Air Fares discussion board. Only on Fool.com.

5 StocksWithOutstanding Returns

By

Chris Mallon



Ask any investor to name management's most important job, and you're likely to get just one answer: Earn the highest possible return on my investment. (Me? I'd probably say, "make sure there's enough coffee for that weird finance guy," but that's just me.)

There exists a strong correlation between return on capital and share prices (duh, right?). Some investors use return on equity (ROE) to measure management's effectiveness, which is OK, but I prefer return on invested capital, or ROIC for short. ROIC measures the return on not only equity but also borrowed funds, which is important because an overleveraged company can show fantastic ROE but only average ROIC. Anheuser-Busch(NYSE: BUD) is a prime example whose not-so-fantastic ROIC is reflected in the stock's poor performance.

ROIC's major drawback is the confusion surrounding how to calculate it. I prefer a cash-flow-based method, using unleveraged net operating profit after tax, or NOPAT, divided by total invested capital. NOPAT is cash flow from operations plus after-tax interest expense. Invested capital is total assets, less non-interest-bearing, short-term liabilities.

Got all that?

Good. Regardless of a company's line of business, if it generates more cash with less capital than its competitors, it's usually successful. Taser International(Nasdaq: TASR), up 670% over the last 12 months, posted a 16% ROIC in 2003 (thanks to its first year of positive operating cash flow) and 24% over the last 12 months.

By paying down its long-term debt and improving working capital management, specialty retailer Tuesday Morning(Nasdaq: TUES) boosted ROIC from 9.4% in 2000 to more than 61% last year. Mr. Market has rewarded the stock, taking it up 530% during that time.

The Spiderman franchise has helped Motley Fool Stock Advisor pick Marvel Enterprises(NYSE: MVL) generate the cash flow necessary to increase ROIC from 8.5% to 31% in two years, propelling the stock from four to 14 bucks.

There's always money to be made helping people slim down, and Weight Watchers(NYSE: WTW) has produced at least a 37% return on invested capital in each of the last three years, while the stock has risen about 30%.

Finally, storage company Western Digital(NYSE: WDC), after years of operating losses finally turned things around, posting a blowout 78% ROIC in 2003. The stock has tripled in three years.

Ben Graham explained that, over time, the market is a weighing machine. As you can see, companies that generate outstanding returns end up being quite heavy.

Fool contributor Chris Mallon owns shares of Anheuser-Busch through his private investment partnership.

Quote of Note

"Very little is needed to make a happy life." -- Marcus Aurelius Antoninus

Is ThisTaser for You?

By

W.D. Crotty



Taser International (Nasdaq: TASR) is soaring today after the announcement of its new X26C Citizen Defense System for "private citizens seeking responsible, nonlethal self-defense protection." For a mere $999, the company will sell you six cartridges, a 40-minute training video, and a certificate for "one free in-home professional training session."

This weapon is sold exclusively by Taser, which eliminates any middlemen eating into the company's high 44% operating margin. To understand the significance of that, consider the margins of a few companies with lighter business models: 30% at Coca-Cola(NYSE: KO), 34% at Microsoft(Nasdaq: MSFT), and 40% at Motley Fool Stock Advisor recommendation Marvel Enterprises(NYSE: MVL).

Those margins are one reason Taser was able to jump 42-fold in a 52-week period that extended into early 2004. The other is that orders continue to pour in for the company's existing products. With revenue growing 150% a quarter and profits growing even faster, the market notices -- and international orders have yet to pour in.

The company is innovating, too. New weapons systems are under development with General Dynamics(NYSE: GD), and, in two years, management plans to introduce an "extended-range electronic projectile" that is wireless and effective at up to 100 meters.

There is negative press. Dow Jones'(NYSE: DJ)Barron's has questioned the stock's valuation. Viacom's(NYSE: VIA) CBS has questioned whether the weapon is 100% nonlethal. But every time a story surfaces like the Sept. 11, 2004, killing of two New York detectives by a suspect able to steal one of the detectives' weapons, the company has more sales literature to show why its weapons are a superior alternative.

Taser has many of the traits that characterize Motley Fool Hidden Gems. The company has high insider ownership, is generating free cash flow, has a well-established market niche, and is growing revenue and profits. But hidden it is not! The company has a $1.1 billion market capitalization for only $46 million in trailing sales.

Taser now has a weapon for the general population. It may just be right for you. But if you are looking for a stock -- a hidden gem -- ready to explode when it is discovered, Taser is not for you.

For a free trial to the Motley Fool Hidden Gems newsletter, click here.

Fool contributor W.D. Crotty owns stock in Motley Fool Stock Advisor recommendation Marvel and has a subscription to the Motley Fool Hidden Gems newsletter. W.D. does not own stock in any of the other companies mentioned.

Coke onSale

By

Seth Jayson (TMF Bent)

Enthusiastic Coca-Cola(NYSE: KO) heads have had to endure a pretty brutal summer season. Let's go to the chart, shall we? Ouch. This morning's 5% pummeling leaves shares at their 52-week low, not exactly a comfy spot for one of the world's best brand names.

I'd like to think some of it's payback for the odd attempts to capitalize on the endlessly overhyped "low-carb" craze with a half-diet Coke, sneakily packaged in odd numbers to camouflage its higher price. There have been little missteps, but the real problem remains revenues. They're not growing much.

As W.D. Crotty pointed out back in July, when Coke took its major nosedive, case volume growth was anemic, and getting thinner. It was only an eighth of rival PepsiCo's(NYSE: PEP)latest increase, and that one left investors with a sour stomach. This is despite strong results from a bevy of fast-food firms, like McDonald's(NYSE: MCD), Yum! Brands(NYSE: YUM), and Wendy's(NYSE: WEN), which show, at the very least, that the global appetite for junk food isn't suffering similarly.

Give management a B for bluntness, at least. There was no attempt at sugarcoating in the title of the release, nor in the opening paragraph. New-ish chairman and CEO Neville Isdell's sternly worded remarks call the results unacceptable, saying "They are symptoms of problems that demand strong corrective actions...."

No kidding. Case volumes were predicted to remain flat. Earnings guidance was reduced to around $0.47 per share for the next quarter, and $0.90 per share for the second half of the year. Oh, by the way, knock off $0.10 per share for "impairment charges" related to a bottling law in Germany.

An 11% knock for the impact of a bottling law in one country? Do I detect the sweet smell of bath oil from an upcoming, supersized soak? Let me check... deep in my crystal ball... I perceive... lower operating expenses and increased profitability in the first half of 2005. (Let me know if I'm wrong.)

At the end of the day, a decision on Coke shares should defer to the cash flow sheet, and that's one place the firm continues to look OK. The $2.96 billion in cash from operations for the first half of this year outpaced net income, usually a good sign. And with capital expenditures around $500 million, free cash flow (FCF) is ample. But if you buy the stock today, the enterprise value is still 17 times the more than $5 billion of FCF during the trailing 12 months. That's cheaper than the market as a whole, but not the discount that the current uncertainty deserves. Fools jonesing for some Coke would do well to wait a bit and see if they can't get a better price.

For related Foolishness:

Seth Jayson enjoys his share of Coke, but at the time of publication, he had positions in no firm mentioned. View his stock holdings and Fool profile here.

More on Fool.com Today

Tomorrow's huge winners are out there today. The trick is finding them, Tom Gardner says in The Next Home Run Stock.... In Exhausting Every Option, Bill Mann reports on a coalition of high-tech companies that is playing its latest gambit on trying to declaw options expensing.

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For a list of all our stories from today, see our Today's Headlines page.