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Investor Insights

This summary was created by AI, based on 23 opinions in the last 12 months.

Open Text is a software company with a focus on enterprise content-management platforms, cloud computing, and AI. Despite a history of slow organic growth, recent acquisitions and focus on AI and cloud computing have shown promise. The company has experienced record revenue and earnings growth in recent quarters, with a strong recurring revenue base. While some experts see the stock as a good long-term investment, others caution on high debt levels and pricey valuation.

Consensus
Mixed
Valuation
Fair Value
DON'T BUY
Open Text

He's looked at it and it's done a fairly good job. Would much prefer ENGH or CSU. And CSU is the clear market leader of companies that rely on acquisitions to drive growth.

computer software / processing
HOLD
Open Text
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

OTEX has been trading sideways over the past couple of years, and its recent earnings results sent the stock lower. It remains highly profitable with good free cash flow, and trades at a cheap valuation for a tech stock (8.3X forward earnings). Its low valuation makes it a HOLD, but we would not add and do not like the negative momentum here.
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computer software / processing
WAIT
Open Text

Growth rates have really come down. It's taking longer to convert customers to cloud and AI. Good, long-term name that will be there. Better areas in AI elsewhere. Good at lower levels, but not here.

computer software / processing
BUY
Open Text

Owns shares in dividend fund. Will continue to hold. Downward guidance has prompted market selloff. Sales growing and appears business plan is strong. Recent management meetings presenting high quality of products.  New A.I. technology very impressive. Current trading multiple very attractive for investors. Consistent dividend growth with steady income at ~3%. 

computer software / processing
WEAK BUY
Open Text

They're trying to incorporate AI and haven't benefited from this AI boom. He's owned this for a while in his TFSA. Has been volatile, their free cash flow growth has been consistent and it's a quality name. Don't expect huge, sudden returns, but it's a good way to offer tech exposure.

computer software / processing
BUY ON WEAKNESS
Open Text
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

OTEX has total debt of $8.84B and net debt of $7.84B. Total debt to equity ratio is 2.2x and Total debt to EBITDA is 5.8x, so debt is definitely high and one reason for lower valuations. OTEX is currently paying a decent yield of 2.77% and looking at payout ratio from free cash flow over the last twelve months is 37%. We do not think there is much risk in the dividend at these levels. While debt is high, interest coverage ratios are more comforting with an EBIT/Interest Expense of 1.5x and EBITDA/Interest Expense of 2.6x. So while debt is at high levels, OTEX is generating enough adjusted earnings to cover payments. OTEX is also expected to see high growth this year and is benefiting from AI tailwinds. While OTEX's current year outlook for growth is good, beyond, 2024 things are expected to slow. The decline in share price it has seen could be attributed partially to debt concerns but also investors shifting to other tech/AI options that have longer runways for growth. 

OTEX shares some slight similarities with CSU and LMN just due to the broad software exposure that all the companies have. CSU of course has a huge suite of software offerings due to its acquisitive growth strategy so there is some overlap. OTEX has a significantly weaker balance sheet and growth outlook compared to CSU and LMN. While OTEX is very cheap right now, but it is fundementally weaker than the latter two and should be substantially cheaper. 
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computer software / processing
BUY
Open Text

Likes it here. Low organic growth rate historically. Recent demo of Navigator with embedded AI was impressive.  Capable serial acquirer. Bread and butter are enterprise content-management platforms: recurring revenues, high retention, mission critical for the Global 10,000. Undemanding multiple. Compounds earnings in mid-teens. Value and growth.

computer software / processing
Unspecified
Open Text

Management deserves more credit. They made their biggest acquisition in history in 2022 which caused the stock to plummet. However they have managed to turn it around as they had claimed they could and are now getting some revenue growth from the acquisition.They have also paid down $2 billion in debt so have a better balance sheet. trades at 11X earnings.

computer software / processing
DON'T BUY
Open Text

Is growing this year, but long term and compared to peers lacks growth in the software consolidation space.

computer software / processing
PAST TOP PICK
Open Text

(A Top Pick May 18/23, Down 4%)

Laggard in the market with disappointing results. Organic growth has been slow. Continues to own shares. Serial acquirer to create growth. Recent M&A starting to pay off. Earnings per share expected to rise. 150 million global users. A.I. products expected to increase. Good long term investment. 

computer software / processing
PAST TOP PICK
Open Text
(A Top Pick Jan 13/23, Up 30%)

Very strong business that has been proving itself. Recent weakness is share price has created major investment opportunity. Believes further upside in the stock. Debt levels coming down. Lots of opportunity going forward. Excellent vertical depth in business mode within sectors. 

computer software / processing
WEAK BUY
Open Text

It is in software which is a great sector. He owns a small amount but owns more of Constellation Software. Open Text has had mixed results over time but is inexpensive and the forecast is for good earnings growth over this year.

computer software / processing
PARTIAL BUY
Open Text
Does recent asset sale change his opinion?

No. The asset was more hardware, whereas OTEX is trying to skew more toward SaaS, AI, large-language models. Today's theme: you have to scale in, as the market is rich, mainly because the USD is so weak. Buy in thirds here, around $52.50, and just under $50. See his Top Picks.

(Analysts’ price target is $58.25)
computer software / processing
HOLD
Open Text

Has owned shares for a long time. Good for long term investors. Added shares in November. Stock performing well since fall. Expecting another acquisition. Not at low entry point. Consistent business. 

computer software / processing
BUY
Open Text
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

In Q1 FY2024 for OTEX, both revenue and EPS beat analysts’ estimates. Revenue came in at US$1.425B displayed year-over-year growth of 67% from $852M. Year-over-year growth in revenue was driven by Cloud revenues increasing 11% and annual recurring revenues increasing 59%. Adjusted EPS came in at $1.01, beating analysts’ estimates of $0.90. Net income was $81M compared to a net loss of ($117M) in the same period a year prior. This was a strong quarter for OTEX, with record quarterly revenue. 

OTEX recently divested AMC for US$2.275B to Rocket Software in an all-cash deal. OTEX has stated that the sale will allow the company to focus more on cloud computing and AI while cutting debt and having the ability to buy back shares in the future. The transaction is expected to close in Q4 of FY2024. Multiple banks upped price targets following this move. The focus on AI and cutting debt that the deal provides are two positives we like to see. Its valuation multiple has historically been held back because of its leverage. 
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computer software / processing
Showing 1 to 15 of 425 entries

Open Text(OTEX-T) Rating

Ranking : 5 out of 5

Bullish - Buy Signals / Votes : 18

Neutral - Hold Signals / Votes : 2

Bearish - Sell Signals / Votes : 3

Total Signals / Votes : 23

Stockchase rating for Open Text is calculated according to the stock experts' signals. A high score means experts mostly recommend to buy the stock while a low score means experts mostly recommend to sell the stock.

Open Text(OTEX-T) Frequently Asked Questions

What is Open Text stock symbol?

Open Text is a Canadian stock, trading under the symbol OTEX-T on the Toronto Stock Exchange (OTEX-CT). It is usually referred to as TSX:OTEX or OTEX-T

Is Open Text a buy or a sell?

In the last year, 23 stock analysts published opinions about OTEX-T. 18 analysts recommended to BUY the stock. 3 analysts recommended to SELL the stock. The latest stock analyst recommendation is . Read the latest stock experts' ratings for Open Text.

Is Open Text a good investment or a top pick?

Open Text was recommended as a Top Pick by on . Read the latest stock experts ratings for Open Text.

Why is Open Text stock dropping?

Earnings reports or recent company news can cause the stock price to drop. Read stock experts’ recommendations for help on deciding if you should buy, sell or hold the stock.

Is Open Text worth watching?

23 stock analysts on Stockchase covered Open Text In the last year. It is a trending stock that is worth watching.

What is Open Text stock price?

On 2024-05-29, Open Text (OTEX-T) stock closed at a price of $40.5.