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With stocks looking like they're taking another dive down this year, it might be a good time to consider one of the few remaining areas that's still growing -- the cloud. Cloud revenue, that is, not cloud stocks. Cloud stocks are down across the board. For instance, the Global X Cloud Computing ETF, which tracks cloud stocks, has cratered 36% this year.

Despite the declining share prices, cloud companies are still growing their revenues and profits. This makes for a compelling opportunity to take advantage of the cloud megatrend. However, not all cloud stocks are created equal. Oracle (ORCL -2.24%) is a company that has a few advantages that other cloud players don't. It's also taking cloud business from the cloud's early market share leader, Amazon.

For decades, Oracle has been a market share leader in ERP (Enterprise Resource Planning) software. ERP software handles huge corporate functions like accounting, project management, and supply chain management for enterprise-sized companies around the globe.

Oracle was a relative latecomer to the cloud transition. Still, it has been moving its expansive customer base from its on-premise server farms to Oracle's Cloud infrastructure and software to its cloud-based version over the last several years. Oracle's competitive advantage remains in its ERP software. The company's software is so hard to duplicate that Microsofthas formed a multi-cloud partnership with Oracle to make it available to its Azure users. Amazon has also made it available to AWS users.

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Its margin profile is perhaps the most attractive feature of Oracle's cloud-based business model. Because the cloud-based software business is digital, there is very little cost associated with adding a new customer or selling additional software to an existing customer. That gives Oracle the advantage of bundling its software and cloud infrastructure services at a lower price than the competition.

In a Q&A session with investors during Oracle's second-quarter earnings announcement, founder and chairman Larry Ellison made some interesting comments. He said that because of its cost advantages and stellar functionality, he expects that cloud customers will be moving from Amazon to Oracle by next quarter -- and some of those companies "will shock you."

Some AWS customers are already on the move. Oracle recently closed its acquisition of Cerner, a healthcare information company. The acquired expertise may have lured Bionexo, a healthcare business serving 15,000 hospitals, to move its data warehouse from AWS to Oracle during the second quarter. In addition, the largest telecom in Chile is also taking its workloads from AWS to Oracle.

One aspect of cloud stocks is that many cloud players are conglomerates that investors must account for. Amazon has its namesake e-commerce platform, which experienced a revenue decline last quarter due to a slowing U.S. economy. Alphabetmakes most of its money from advertising, which could suffer for the same reason.

Oracle, on the other hand, is focused on its cloud business. As the company continues to move its current customers to the cloud, its margins should improve accordingly. The same can be said about customers switching to Oracle's cost-advantaged cloud platform. Oracle investors have the added benefit of not having additional businesses hiding the growth of its cloud platform.

The trend toward cloud computing is firmly entrenched and has plenty of room for growth over the next several years. Industry analysts expect cloud computing to grow 15.8% annually through 2028. Because of Oracle's ERP software dominance and cost advantages, the company should capture an above-average share of the growth.

Numbers from its first fiscal quarter ending Aug. 31 may be evidence. Oracle grew its cloud infrastructure revenue by 58% in constant currency (after adjusting for fluctuations in foreign currency) and its Cloud Application revenue by 48% in constant currency. Those numbers bested revenue growth at AWS for the quarter and significantly increased from Oracle's fiscal fourth quarter.

ORCL PE Ratio (Forward) data by YCharts

If you're looking for a stock that can take full advantage of the cloud growth megatrend without the additional baggage, Oracle is a great bet. It has the twofold advantage of ERP software supremacy and cost advantage over other cloud companies.

Like other cloud stocks, Oracle shares are down this year. Now, investors may also find the stock's valuation enticing. Wall Street expects Oracle to generate $4.95 in earnings per share for this fiscal year. That implies a favorable forward price-to-earnings ratio (based on forecasted earnings per share) of under 14 times, nearly its lowest in over a year. Tune in to Oracle's next-quarter earnings, and you might see the shocking AWS customer wins that Ellison predicted.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fools board of directors. BJ Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool has a disclosure policy.

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This Company Is Taking Cloud Customers From Amazon - The Motley Fool