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  • Sep 19, 2023 - Best Artificial Intelligence Stock - Oracle Financial Services or Bosch?

Best Artificial Intelligence Stock - Oracle Financial Services or Bosch?

Sep 19, 2023

Best Artificial Intelligence Stock - Oracle Financial Services or Bosch?

From sports to music, to financial services to healthcare, Artificial Intelligence (AI) is becoming an integral part of every sector.

By 2030, it is anticipated that AI will be contributing around US$ 15.7 trillion (tn)) to the global economy.

While there are a lot of new players coming in to the industry, the traditional tech giants are shaping it for obvious reasons such as advanced R&D facilities, ample resources, and access to global markets.

In this piece, we will evaluate two of such tech giants who are changing the AI industry for the better - Oracle Financial and Bosch.

Business Overview

# Oracle Financial Services Software

Oracle is a data-driven tech company, which offers services to enhance customer experiences of its clients spread across industries.

It is one of the leading companies when it comes to cloud services, machine learning, and AI. Oracle is also known for its risk-management services around the world and manages 24 global SIFIs. It serves around 15% of the global population across 140 countries.

Oracles primarily serves five sectors, which include retail banking, core banking, corporate banking, health insurance, and life insurance.

It also offers solutions in cloud infrastructure, data management, AML and financial crime compliance, revenue management, customer experience and acquisition, and more.

Some of the primary products from Oracle include:

  • AI and Machine Learning
  • OCI overview
  • Big Data
  • Compliance
  • Cloud Regions
  • Analytics and BI
  • Data Lake
  • ERP
  • Others

The artificial intelligence business segment of Oracle Financial includes the following for all cloud applications it offers to clients with AI integration.

  • Advanced state-of-the-art generative AI solutions
  • High-quality AI infrastructure

Oracle has some strong partnerships and a customer base for its AI products and services, which includes names like Experian, NHS, Anaconda, and RAZER.

# Bosch

The Bosch Group is also a global player when it comes to technology and services. It offers its services primarily to four sectors which include...

  • Mobility
  • Energy and Building Technology
  • Industrial Technology
  • Consumer Goods

Bosch aims at making life of its customers better and easier with their innovative solutions, which either are developed with the help of artificial intelligence or contain AI solutions. The primary offerings include software, sensor technology, and IoT cloud services.

Bosch has a presence in over 60 countries via its subsidiaries and regional offices.

For the Mobility segment, the core solutions offered by Bosch include systems and components for both FCEV technology and hydrogen engines.

Then it offers an entire solution for hydrogen-based powertrains. Bosch's unique product axles make use of electric motors, power electronics, and transmission to deliver efficiency and mileage.

Another innovative product offered by Bosch is iTraMs. It's an Intelligent Transport Management system that offers an array of solutions for connected vehicles, helps in data collection using sensors on the vehicles that are connected, helps in detecting malfunctioning in the vehicle and a lot more.

Bosch offers aftermarket solutions such as software and hardware for diagnosing issues with the vehicles, training courses and programs for the technicians at the services centres. It also offers services and solutions for both private and commercial vehicles, as well as for rail and ships along with off-highway applications.

In the consumer goods segment, Bosch offers AI-powered reliable solutions for everyday home appliances. This helps make life easier for customers.

Coming to the industrial technology, energy and building technology segment, Bosch offers an array of services and solutions, which are innovative, and feature high-end technology.

From mobile applications to ease the in-house workflow, and monitoring of the entire process and the teams, to developing business-specific automation solutions, the company offers it all.

Revenue

In the financial year ended March 2023, the revenue of Oracle Financial went up by 9.9% on a YoY basis. On the other hand, Bosch's revenue went up by 26.4%.

Revenue (Rs bn)
Revenue 23-Mar 22-Mar 21-Mar 20-Mar 19-Mar 5-year CAGR (%) YoY Change (%)
Oracle Financial 58.9 53.6 51.2 50.4 51.3 2.8 9.9
Bosch 154 121.8 102.2 103.9 128.5 3.7 26.4
Data Source: BSE

The revenue has been growing consistently over the past three years for both these tech giants.

One of the primary reasons behind the double-digit growth in the revenue of Bosch can be attributed to the growth of the automotive industry. The industry grew by 22% in FY23 even without including the 2-wheeler segment.

For Oracle Financial, it is the growth in the fintech space, which is driving the revenue of the company. In FY23, its revenue from the cloud services grew by around 23%.

Profitability

The net profit of Bosch went up from Rs 12.2 bn in FY22 to Rs 14.3 bn in FY23, which is an increase of around 17.2%.

However, Oracle Financial's net profit fell 4.2% during the same period.

Profit (Rs bn)
Net Profit 23-Mar 22-Mar 21-Mar 20-Mar 19-Mar 5-year CAGR (%) YoY Change (%)
Oracle Financial 18.1 18.9 17.6 14.6 13.9 5.4 -4.2
Bosch 14.3 12.2 4.8 6.5 15.9 -2.1 17.2
               
EPS (Rs)              
Oracle Financial 209.1 219.2 204.9 170.4 161.9 5.2 -4.6
Bosch 483.3 413.1 163.4 198.2 525.2 -1.6 17
Data Source: BSE

The profits fell in FY23 for Oracle Financial Services primarily due to new restrictions in the digital finance industry.

The government imposed certain restrictions on digital lending, BNPL and similar services, which might have affected the profits of Oracle Financial.

However, the company's profits increased every year consecutively from FY19 to FY22 owing to the massive shift towards digital financial services during the pandemic.

On the contrary, Bosch's profits went up mainly due to the growth in its mobility business segment and overall progress in the automotive industry. The industry was adversely affected during the pandemic, which brought down the profits of Bosch Group during FY20 and FY19.

Dividends

When it comes to dividends, both these technology firms are favourites of investors.

Oracle Financial paid Rs 224.6 per share as a dividend in the previous financial year while Bosch paid Rs 480 per share.

Dividends
Oracle Financial 23-Mar 22-Mar 21-Mar 20-Mar 19-Mar
Dividend per share (Rs) 224.6 189.4 198.9 178.6 0
Dividend Payout Ratio (%) 107.6 86.8 97.7 105.7 0
Dividend Yield (%) 6.9 5.3 6.3 8.9 0
           
Bosch          
Dividend per share (Rs) 480 210 115 105 105
Dividend Payout Ratio (%) 99.4 50.9 70.6 53 19.4
Dividend Yield (%) 2.5 1.5 0.8 1.1 0.6
Source: Equitymaster

Both stocks are suitable for investors looking to earn from regular dividends. Oracle Financial often paid dividends more than its earnings while Bosch gradually increased its dividend payout ratio.

Returns

The return ratios these two AI companies have been positive over the past five years. In FY23, Oracle Financial offered a Return on Equity (ROE) of 24.7% while Bosch offered 12.9%.

However, the former's ROE tanked by 9.2% on a YoY basis while that of Bosch went up by 13.2% during the same period.

Returns
ROE 23-Mar 22-Mar 21-Mar 20-Mar 19-Mar 5-year CAGR (%) YoY Change (%)
Oracle Financial 24.7 27.2 26.3 22.9 29 -3.2 -9.2
Bosch 12.9 11.4 4.9 6.3 17.5 -5.9 13.2
               
RoCE              
Oracle Financial 35.4 36.6 37.3 35.9 47.5 -5.7 -3.3
Bosch 17.2 11.1 5.9 10 25.7 -7.7 55
Source: Equitymaster

The Return on Capital Employed (RoCE) of Bosch which surged by 55% in FY23 on a YoY basis suggests that the company's management has been prudently using the capital and it has consecutively gone up in the past three years.

In the case of Oracle Financial, the RoCE has dropped by 3.3% on a YoY basis but it's still almost double of Bosch during the same period.

Valuation

Looking at the average price-to-earnings (P/E) ratio of both companies, it is evident that Oracle Financial is valued fairly compared to Bosch whose average P/E has been highly volatile, especially during FY20 and FY21.

Moreover, the average P/E of Bosch is almost double of Oracle Financial indicating it as an expensive stock at the current price levels. However, in the past two years, the volatility has calmed down for Bosch as well.

Valuation (x)
Average P/E Ratio 23-Mar 22-Mar 21-Mar 20-Mar 19-Mar
Oracle Financial 15.9 19 13.8 15.2 24.7
Bosch 33.6 39.3 78.6 66.1 36.6
           
P/B Ratio          
Oracle Financial 3.9 5.2 3.6 3.5 7.2
Bosch 4.3 4.5 3.9 4.2 6.4
Source: Equitymaster

The price-to-book value ratio (P/B ratio) entails the same scenario. Oracle's P/B ratio is lower than that of Bosch's and thus, it shows that the latter is expensive at the present price levels.

Future Prospects

With the adoption of artificial intelligence in every industry, the future of Oracle Financial and Bosch looks promising.

Recently, Oracle Financial became a founding member of CancerX, which is a public-private partnership to bring down the fatality rate related to cancer.

Oracle will offer its AI-related services along with its diversified team to assist in finding new solutions for cancer therapy. This can help Oracle Financial to explore the healthcare industry which has heavy potential for incorporation of AI in the future.

The adoption of AI in financial services and fintech companies is expected to grow at a CAGR of 23.37% in the next two years, which is a huge prospect for Oracle Financial as a leader in the AI space.

Bosch, on the other hand, is working towards increasing its retail presence in the country, along with growing its digital footprints.

In the mobility space, Bosch is leading the AI-based MoveID project, which will help in mobility identification.

Bosch is also working towards responsible and ethical use of AI for which it already launched a Center for Responsible AI (CeRAI) in collaboration with IIT (Madras) in May 2023.

Conclusion

With the increase in popularity and demand for AI-based products and services, both these tech giants are expected to flourish further.

At present, Bosch shares may be a little expensive, but it has solid plans in the pipeline to justify the future growth prospects.

Oracle Financial, on the contrary is quite consistent with its performance over the past few years and offering higher returns to the investors.

Though both companies are working in the AI space, they cater to different industries, and this has a significant impact on their performance as well.

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