Stock Evaluation
Company Description: OPEN TEXT 8 Jan 2025
Company description: “Open Text Corporation is a Canada-based information management company, which provides software and services. Its comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMBs), governments and consumers around the world. It has a complete and integrated portfolio of information management solutions delivered at scale in the OpenText Cloud, enabling organizations master modern work, automate application delivery and modernization, and optimize their digital supply chains by bringing together content cloud, cybersecurity cloud, business network cloud, its operations management cloud, application automation cloud and analytics and artificial intelligence (AI) cloud. Its products include Information Management at scale, AI cloud, Business Network Cloud, Content Cloud, Cybersecurity Cloud, Developer Cloud, DevOps Cloud, Experience Cloud, IT Operation Cloud, Portfolio, and Products A-Z.”
Business Valuation Algorithm Criteria in 10 Steps
Step 1: Marketplace
Is the marketplace expanding? - Yes
Is the company’s share of the marketplace expanding?-Yes
Does this marketplace have good profit margins?
Yes at 8.35% x $5.4B revenue
Step 2: Leadership
Does the company display strong leadership, entrepreneurial character and competitiveness?
Yes as it is run by Marc Barrenechea who started the company
and has proven to be a great leader. (Green Flag)
Step 3 Earnings
Have earnings been rising during the last 3 years?
Are earnings projected to continue to go up this year and next year?
Yes, although it is dropped below its peak set last year
but is moving upwards for next year. (Med Green Flag)
Step 4 Cumulative Earnings
What is the cumulative value of 5 years of earnings shown compared to the stock price?
64.2% (Green Flag)
Step 5 Price to Earnings Ratio
What is the price over earnings?
14.4 (Green Flag for tech stock)
What is the 5 year growth percentage?
7% (Med Green Flag )
What is the 5 yr growth % compared to the P/E?
7 vs 14.4 (Green Flag)
What is the 5 yr growth % compared to next years growth %?
7 vs 14 (Big Green Flag)
Step 6 Dividends
Is the dividend generous (ie: above 4%)?
3.66% (Med Green Flag)
Is the dividend easily covered by earnings?
E = 2x Div (Big Green Flag)
Is the stock a dividend aristocrat (ie: dividend growth on a yearly basis over 25 years).
Yes (Green Flag)
Step 7 Global Reach
Does the company sell globally?
Yes (Green Flag)
Step 8 Directors
Do the directors own more than 10% of the company?
No
Are directors adding to their share ownership?
Yes last August 2023 (Green Flag)
Is the company buying back its shares?
No
Step 9 Using AI as a tool to confirm a stock information
To Gemini: is Open Text a good stock to buy now?
Whether Open Text (OTEX) is a good stock to buy depends
on your investment goals and risk tolerance:
Growth investors: Open Text might not be a top pick
until it shows revenue acceleration.
Income investors: Open Text's dividend yield
and share buybacks could be attractive.
Cautious investors: Open Text's cash flow stability and AI ambitions
could provide a long-term case for optimism.
However, its high debt-to-equity ratio and slowed
revenue growth could be concerns.
Momentum investors: Open Text's recent price changes
and earnings estimate revisions indicate
it might not be a good stock for momentum investors.
Here are some other things to consider about Open Text:
AI: Open Text is investing in AI-driven solutions and cybersecurity enhancements.
Debt: Open Text has a high debt-to-equity ratio of 159%.
Revenue growth: Open Text's revenue growth has slowed in the latest quarters.
Market cap: Open Text's market cap has decreased by -33.58% in one year.
Final Thoughts
Open Text's strength has been in the acquiring of other software companies and adding them to their business software ecosystem. However, about 2 years ago they made a very large acquisition that is taking longer than expected to incorporate into their system; this issue deflated their earnings and their stock price. Based on their strong leadership and expertise, we have some confidence that they can turn the ship back on course, based on all the green flags noted above. Based on analysts estimated earnings projections found on LSEG, the price is projected to triple from $41.28 to $125.40 over the next 5 years. This is considered a value buy as its present price is below a discounted 5 year growth rate of 20% to meet that $125.40 target price.
Company Description: OPEN TEXT 8 Jan 2025
Company description: “Open Text Corporation is a Canada-based information management company, which provides software and services. Its comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMBs), governments and consumers around the world. It has a complete and integrated portfolio of information management solutions delivered at scale in the OpenText Cloud, enabling organizations master modern work, automate application delivery and modernization, and optimize their digital supply chains by bringing together content cloud, cybersecurity cloud, business network cloud, its operations management cloud, application automation cloud and analytics and artificial intelligence (AI) cloud. Its products include Information Management at scale, AI cloud, Business Network Cloud, Content Cloud, Cybersecurity Cloud, Developer Cloud, DevOps Cloud, Experience Cloud, IT Operation Cloud, Portfolio, and Products A-Z.”
Business Valuation Algorithm Criteria in 10 Steps
Step 1: Marketplace
Is the marketplace expanding? - Yes
Is the company’s share of the marketplace expanding?-Yes
Does this marketplace have good profit margins?
Yes at 8.35% x $5.4B revenue
Step 2: Leadership
Does the company display strong leadership, entrepreneurial character and competitiveness?
Yes as it is run by Marc Barrenechea who started the company
and has proven to be a great leader. (Green Flag)
Step 3 Earnings
Have earnings been rising during the last 3 years?
Are earnings projected to continue to go up this year and next year?
Yes, although it is dropped below its peak set last year
but is moving upwards for next year. (Med Green Flag)
Step 4 Cumulative Earnings
What is the cumulative value of 5 years of earnings shown compared to the stock price?
64.2% (Green Flag)
Step 5 Price to Earnings Ratio
What is the price over earnings?
14.4 (Green Flag for tech stock)
What is the 5 year growth percentage?
7% (Med Green Flag )
What is the 5 yr growth % compared to the P/E?
7 vs 14.4 (Green Flag)
What is the 5 yr growth % compared to next years growth %?
7 vs 14 (Big Green Flag)
Step 6 Dividends
Is the dividend generous (ie: above 4%)?
3.66% (Med Green Flag)
Is the dividend easily covered by earnings?
E = 2x Div (Big Green Flag)
Is the stock a dividend aristocrat (ie: dividend growth on a yearly basis over 25 years).
Yes (Green Flag)
Step 7 Global Reach
Does the company sell globally?
Yes (Green Flag)
Step 8 Directors
Do the directors own more than 10% of the company?
No
Are directors adding to their share ownership?
Yes last August 2023 (Green Flag)
Is the company buying back its shares?
No
Step 9 Using AI as a tool to confirm a stock information
To Gemini: is Open Text a good stock to buy now?
Whether Open Text (OTEX) is a good stock to buy depends
on your investment goals and risk tolerance:
Growth investors: Open Text might not be a top pick
until it shows revenue acceleration.
Income investors: Open Text's dividend yield
and share buybacks could be attractive.
Cautious investors: Open Text's cash flow stability and AI ambitions
could provide a long-term case for optimism.
However, its high debt-to-equity ratio and slowed
revenue growth could be concerns.
Momentum investors: Open Text's recent price changes
and earnings estimate revisions indicate
it might not be a good stock for momentum investors.
Here are some other things to consider about Open Text:
AI: Open Text is investing in AI-driven solutions and cybersecurity enhancements.
Debt: Open Text has a high debt-to-equity ratio of 159%.
Revenue growth: Open Text's revenue growth has slowed in the latest quarters.
Market cap: Open Text's market cap has decreased by -33.58% in one year.
Final Thoughts
Open Text's strength has been in the acquiring of other software companies and adding them to their business software ecosystem. However, about 2 years ago they made a very large acquisition that is taking longer than expected to incorporate into their system; this issue deflated their earnings and their stock price. Based on their strong leadership and expertise, we have some confidence that they can turn the ship back on course, based on all the green flags noted above. Based on analysts estimated earnings projections found on LSEG, the price is projected to triple from $41.28 to $125.40 over the next 5 years. This is considered a value buy as its present price is below a discounted 5 year growth rate of 20% to meet that $125.40 target price.
Algorithm
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