OTEX  Open Text Corporation

Exchange

NASDAQ

Sector

Technology

Industry

EDP Services

Market Cap.

8.92B

Vuru Grade

65.62/100

Current Price

$33.91
+0.12 (+0.36%)

Growth Price

$29.54
Overvalued by 12.87%

Stability Price

$3.92
Overvalued by 88.45%

Company Metrics

  • P/E 8.46
  • P/S 3.88
  • P/B 2.52
  • EPS 4.01
  • Cash ROIC 13.21%
  • Cash Ratio 0.39
  • Dividend 0.53 / 1.56%
  • Avg. Vol. 469,348.00
  • Shares 263.05M
  • Market Cap. 8.92B

Company Description

Open Text Corporation develops, markets, sells, licenses, and supports enterprise content management (ECM) solutions primarily in North America and Europe. The company's ECM software and solutions enable customers to manage various types of enterprise content, including business documents, Web content, records, digital assets, email, forms and reports, forums, blogs, wikis, and real time instant m... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Are Analysts Bearish Open Text Corp (USA) (NASDAQ:OTEX) After Last Week?
WeeklyHub - Oct 19, 2017
Among 8 analysts covering OpenText Corporation (NASDAQ:OTEX), 7 have Buy rating, 0 Sell and 1 Hold. Therefore 88% are positive.
Snow Capital Management LP Cut Its Open Text (OTEX) Stake; 3 Bullish Analysts ... - Herald KS
Open Text (USA) (OTEX) Analysts See $0.11 EPS; Hostess Brands Class A (TWNK ...
Herald KS - 13 hours ago
Analysts expect Open Text Corp (USA) (NASDAQ:OTEX) to report $0.11 EPS on November, 2.They anticipate $0.30 EPS change or 73.17% from last quarter's $0.41 EPS.
Why Open Text Corp. Is up Over 3%
The Motley Fool Canada - Aug 4, 2017
Open Text Corp. (TSX:OTEX)(NASDAQ:OTEX), one of the world's leading providers of enterprise information management (EIM) solutions, announced its fourth-quarter earnings results after the market closed yesterday, and its stock has responded by rising ...
Which Is the Better Buy: Sierra Wireless, Inc. or Open Text Corp.?
The Motley Fool Canada - Oct 18, 2017
Technology stocks often present the most growth opportunities, as industries change and companies find ways to improve day-to-day operations.
Analysts See $0.11 EPS for Open Text (USA) (OTEX); LINN ENERGY (LNGG) Shorts ... - NormanObserver.com
EPS for Open Text Corp (USA) (OTEX) Expected At $0.11
Weekly Register - Oct 14, 2017
Analysts expect Open Text Corp (USA) (NASDAQ:OTEX) to report $0.11 EPS on November, 2.They anticipate $0.30 EPS change or 73.17 % from last quarter's $0.41 EPS.
Open Text Corp (OTEX) Holder Blue Harbour Group LP Has Upped Stake by $123.05 ... - BZ Weekly
Why Open Text Corp (USA) (NASDAQ:OTEX) stock will be just fine
BNL Finance (press release) (registration) (blog) - May 12, 2017
OTEX stock is down about 6% since Open Text Corp (USA) (NASDAQ:OTEX) announced earnings. The company missed EPS expectations and revenue expectations.
Open Text Corporation Shares Fall As Company Misses On Q3 Earnings - Investing.com
Open Text Corp.: Deep Value Hiding in Plain Sight?
The Motley Fool Canada - May 8, 2017
Open Text Corp. (TSX:OTEX)(NASDAQ:OTEX) is a Canadian developer of enterprise information management (EIM) software. Open Text's software is used to manage content or unstructured data for commercial and government organizations. The stock ...
Buffett Followers: Open Text Corp. Is a Dividend-Growth King in the Making
The Motley Fool Canada - Jan 24, 2017
Open Text Corp. (TSX:OTC)(NASDAQ:OTEX) is a rare technology gem with explosive earnings growth that many investors overlook.
Open Text Corp (USA) (NASDAQ:OTEX) Stock “Strong Buy” Reiterated After Split - BNL Finance (press release) (registration) (blog)
Analysts See $0.11 EPS for Open Text Corp (USA) (OTEX)
BZ Weekly - Oct 8, 2017
Analysts expect Open Text Corp (USA) (NASDAQ:OTEX) to report $0.11 EPS on November, 2.They anticipate $0.30 EPS change or 73.17 % from last quarter's $0.41 EPS.
Blue Harbour Group LP Lifted Open Text Corp (OTEX) Holding
WeeklyHub - Sep 28, 2017
Clifton S. Robbins increased its stake in Open Text Corp (OTEX) by 131.44% based on its latest 2017Q2 regulatory filing with the SEC.
Public Sector Pension Investment Board Has Trimmed Its Open Text Corp (OTEX ... - BZ Weekly
Public Sector Pension Investment Board Has Trimmed Stake in Open Text Corp ... - Weekly Register
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for OTEX to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate OTEX's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$33.91 Current Price

$29.54 Growth Price (DCF)

Overvalued by 12.87%


Growth Rate Assumed by Market: 20.75%


Future Free Cash Flow Growth Rate: 15.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$3.92 Stability Price (EPV)

Overvalued by 88.45%


Discount Rate: 15.0%

$48.54 Book Price

Undervalued by 43.13%


Shrinking Cash Return on Invested Capital over the past 5 years

OTEX has less efficiently invested its financial resources in buildings, projects, and equipment, resulting in increasingly weaker returns. Look at its Annual Reports to determine whether this decrease has been caused by one-time events or a more general decrease in investment returns.

OTEX has created $13.21 of cash for every $100 invested.
Figures in USD. Fiscal year ends in June
20132014201520162017
Free Cash Flow 295.20M 374.67M 445.99M 455.71M 359.66M
divided by
Invested Capital 1.66B 2.83B 3.05B 3.19B 5.91B
Cash ROIC 17.82% 13.24% 14.61% 14.30% 6.09%

Excellent Return on Equity over the past 5 years

Over the past 5 years, OTEX has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

OTEX has generated $16.12 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in June
20132014201520162017
Net Income 148.52M 218.07M 234.41M 284.50M 1.03B
divided by
Stockholders' Equity 1.34B 1.64B 1.83B 1.98B 3.53B
Return on Equity 11.11% 13.28% 12.81% 14.38% 29.04%

Excellent Business Performance over the past 10 years

OTEX has been able to maintain profitability in good times and bad. This could mean OTEX has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

OTEX has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Free Cash Flow 159.08M 164.02M 160.88M 186.56M 240.47M 295.20M 374.67M 445.99M 455.71M 359.66M

Weak Balance Sheet

OTEX's financial position is not ideal. The key is to check whether OTEX is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Cash 254.92M 275.82M 326.19M 284.14M 559.75M 470.45M 427.89M 711.17M 1.30B 443.36M
Current Assets 430.07M 434.91M 539.64M 515.16M 789.27M 717.09M 815.74M 1.10B 1.67B 1.00B
Total Assets 1.43B 1.51B 1.71B 1.93B 2.44B 2.65B 3.92B 4.39B 5.15B 7.48B
Current Liabilities 297.86M 318.73M 422.89M 415.37M 476.51M 527.88M 659.88M 625.43M 671.03M 1.13B
Total Liabilities 798.52M 820.77M 827.80M 892.92M 1.26B 1.32B 2.28B 2.56B 3.18B 3.95B
Stockholder' Equity 636.16M 686.46M 886.22M 1.04B 1.18B 1.34B 1.64B 1.83B 1.98B 3.53B
Current Ratio 1.44 1.36 1.28 1.24 1.66 1.36 1.24 1.76 2.49 0.89
TL-to-TA 0.56 0.54 0.48 0.46 0.52 0.50 0.58 0.58 0.62 0.53

Consistent Reinvestment of Profits over the past 10 years

OTEX has consistently retained profits. This may put OTEX in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, OTEX can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Retained Earnings 47.54M 104.48M 192.03M 316.89M 442.07M 572.89M 716.32M 863.02M 992.55M 1.90B
Retained Earnings Growth - 119.77% 83.80% 65.02% 39.50% 29.59% 25.04% 20.48% 15.01% 91.19%

Inconsistent Net Profit Margins over the past 10 years

OTEX potentially has a competitive advantage, however inconsistent profit margins are a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$14.38 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Net Income 53.01M 56.94M 87.55M 123.20M 125.17M 148.52M 218.07M 234.41M 284.50M 1.03B
divided by
Revenue 725.53M 785.67M 912.02M 1.03B 1.21B 1.36B 1.62B 1.85B 1.82B 2.29B
Net Profit Margin 7.31% 7.25% 9.60% 11.92% 10.37% 10.89% 13.42% 12.66% 15.60% 44.78%

Strong Pricing Power over the past 10 years

OTEX has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$69.20 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Gross Profit 492.80M 533.83M 615.49M 692.28M 1.04B 877.43M 1.11B 1.25B 1.25B 1.53B
divided by
Revenue 725.53M 785.67M 912.02M 1.03B 1.21B 1.36B 1.62B 1.85B 1.82B 2.29B
Gross Margin 67.92% 67.95% 67.49% 67.00% 86.00% 64.36% 68.51% 67.50% 68.53% 66.72%

Low Capital Intensity over the past 10 years

OTEX has consistently used a small portion of their Net Income buying new equipment or investing in new facilities. This indicates that OTEX may require minimal investment to stay competitive. This leaves them with extra money to spend on growing their business and potentially buying back stock.

20.73% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Capital Expenditure 6.90M 12.15M 19.31M 36.66M 26.02M 23.30M 42.46M 77.05M 70.01M 79.59M
divided by
Net Income 53.01M 56.94M 87.55M 123.20M 125.17M 148.52M 218.07M 234.41M 284.50M 1.03B
Capital Expenditure Ratio 13.01% 21.34% 22.06% 29.76% 20.79% 15.69% 19.47% 32.87% 24.61% 7.76%

No Dividend History over the past 10 years

OTEX has never distributed dividends or has recently suspended their dividend distribution.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Dividend Paid - - - - - - - - - -
divided by
Shares Outstanding 52.60M 53.27M 57.39M 58.26M 58.73M 118.12M 120.58M 122.96M 122.04M 255.81M
Dividend Paid Per Share - - - - - - - - - -
Price at Year End 30.60 40.67 46.76 51.14 55.33 92.65 58.91 48.68 61.81 32.71
Dividend Yield - - - - - - - - - -

History of Stock Buybacks over the past 10 years

OTEX has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Shares Outstanding 52.60M 53.27M 57.39M 58.26M 58.73M 118.12M 120.58M 122.96M 122.04M 255.81M
Stock Bought Back - -1.25% -7.17% -1.50% -0.81% -50.28% -2.03% -1.94% 0.75% -52.29%
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