What Open Text (OTEX) Investors Need to Know

Open Text logged a -0.9% change during today's morning session, and is now trading at a price of $38.08 per share.

Open Text shares moved -10.7% over the last 52 weeks, with a high of $43.1 and a low of $24.91. During this time, the stock lagged the S&P 500 index by -2.0%. As of January 2022, the company's 50-day average price is $35.6. Open Text Corporation engages in the designs, develops, markets, and sells information management software and solutions. The large-cap Technology company has 14,400 full time employees and is based in Waterloo, Canada. Open Text has returned a 2.4% dividend yield over the last 12 months.

Snapshot of the Company's Consistent Operating Margins:

2019-06-30 2020-06-30 2021-06-30 2022-06-30
Revenue $2,868,755 $3,109,736 $3,386,115 $3,493,844
Gross Margins 67.6% 67.7% 69.4% 69.6%
Operating Margins 21.0% 19.4% 21.9% 19.8%
Net Income $285,501 $234,225 $310,672 $397,090
Net Margins 9.95% 7.53% 9.17% 11.37%
Earnings Per Share $1.06 $0.86 $1.14 $1.17
Diluted Shares 269,908 271,817 273,479 270,463
Free Cash Flow $812,441 $881,827 $812,445 $888,701
Capital Expenditures -$63,837 -$72,709 -$63,675 -$93,109
Net Current Assets -$2,487,977 -$3,841,714 -$3,307,823 -$3,861,346
Current Ratio 1.54 1.25 1.62 1.56
Long Term Debt $2,604,878 $3,584,311 $3,578,859 $4,209,567
Net Debt / EBITDA 1.54 2.14 1.5 2.02

Open Text Is Reasonably Valued:

Compared to the Technology sector's average of 27.16, Open Text has a trailing twelve month P/E ratio of 32.5 and, according to its EPS guidance of 5.91, an expected P/E ratio of 6.4.

Furthermore, Open Text is likely undervalued in terms of its equity because its P/B ratio is 2.5 compared to its sector average of 6.23. The company's shares are currently trading 98.5% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 4-year average EPS * book value per share) = √(22.5 * 1.06 * 15.435) = $19.19

Open Text Benefits From Positive Market Indicators:

3 analysts are following Open Text and have set target prices ranging from $49.57 to $63.16 per share. On average, they have given the company a rating of buy. At the current price of $38.08, OTEX is trading -33.0% away from its average analyst target price of $56.84 per share, implying an analyst consensus of strong upside potential for the stock.

The company has an average amount of shares sold short since 2.7% of the company's shares are tied to short positions. Institutions own 76.0% of Open Text's shares, while the insider ownership rate stands at 1.76%. The biggest shareholder is Jarislowsky, Fraser Ltd with a 6% stake in the company worth approximately $633,320,505.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.