OPEN TEXT CORP (OTEX)
CA6837151068 - Common Stock
We assign a fundamental rating of 6 out of 10 to OTEX. OTEX was compared to 277 industry peers in the Software industry. OTEX has a medium profitability rating, but doesn't score so well on its financial health evaluation. OTEX is growing strongly while it also seems undervalued. This is an interesting combination
1. Profitability
1.1 Basic Checks
In the past year OTEX was profitable.
In the past year OTEX had a positive cash flow from operations.
OTEX had positive earnings in each of the past 5 years.
In the past 5 years OTEX always reported a positive cash flow from operatings.
1.2 Ratios
OTEX's Return On Assets of 1.03% is fine compared to the rest of the industry. OTEX outperforms 69.93% of its industry peers.
Looking at the Return On Equity, with a value of 4.07%, OTEX is in the better half of the industry, outperforming 74.64% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 5.26%, OTEX is in the better half of the industry, outperforming 79.35% of the companies in the same industry.
OTEX had an Average Return On Invested Capital over the past 3 years of 5.29%. This is below the industry average of 10.19%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.03% | ||
| ROE | 4.07% | ||
| ROIC | 5.26% |
ROA(3y)2.67%
ROA(5y)2.78%
ROE(3y)7.06%
ROE(5y)6.87%
ROIC(3y)5.29%
ROIC(5y)5.49%
1.3 Margins
OTEX has a Profit Margin of 2.85%. This is in the better half of the industry: OTEX outperforms 72.46% of its industry peers.
In the last couple of years the Profit Margin of OTEX has declined.
OTEX has a Operating Margin of 16.49%. This is amongst the best in the industry. OTEX outperforms 86.96% of its industry peers.
OTEX's Operating Margin has declined in the last couple of years.
OTEX has a Gross Margin of 72.35%. This is in the better half of the industry: OTEX outperforms 61.96% of its industry peers.
OTEX's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 16.49% | ||
| PM (TTM) | 2.85% | ||
| GM | 72.35% |
OM growth 3Y-7.68%
OM growth 5Y-4.3%
PM growth 3Y-23.64%
PM growth 5Y-17.18%
GM growth 3Y1.42%
GM growth 5Y1.3%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), OTEX is destroying value.
The number of shares outstanding for OTEX has been increased compared to 1 year ago.
OTEX has more shares outstanding than it did 5 years ago.
OTEX has a worse debt/assets ratio than last year.
2.2 Solvency
Based on the Altman-Z score of 1.23, we must say that OTEX is in the distress zone and has some risk of bankruptcy.
Looking at the Altman-Z score, with a value of 1.23, OTEX is doing worse than 60.14% of the companies in the same industry.
OTEX has a debt to FCF ratio of 11.08. This is a negative value and a sign of low solvency as OTEX would need 11.08 years to pay back of all of its debts.
With a Debt to FCF ratio value of 11.08, OTEX perfoms like the industry average, outperforming 49.64% of the companies in the same industry.
OTEX has a Debt/Equity ratio of 2.01. This is a high value indicating a heavy dependency on external financing.
OTEX has a Debt to Equity ratio of 2.01. This is amonst the worse of the industry: OTEX underperforms 82.61% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.01 | ||
| Debt/FCF | 11.08 | ||
| Altman-Z | 1.23 |
ROIC/WACC0.62
WACC8.54%
2.3 Liquidity
OTEX has a Current Ratio of 1.40. This is a normal value and indicates that OTEX is financially healthy and should not expect problems in meeting its short term obligations.
Looking at the Current ratio, with a value of 1.40, OTEX is in line with its industry, outperforming 44.57% of the companies in the same industry.
A Quick Ratio of 1.40 indicates that OTEX should not have too much problems paying its short term obligations.
OTEX's Quick ratio of 1.40 is in line compared to the rest of the industry. OTEX outperforms 45.65% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.4 | ||
| Quick Ratio | 1.4 |
3. Growth
3.1 Past
OTEX shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 28.53%, which is quite impressive.
Measured over the past 5 years, OTEX shows a small growth in Earnings Per Share. The EPS has been growing by 5.21% on average per year.
OTEX shows a strong growth in Revenue. In the last year, the Revenue has grown by 51.37%.
The Revenue has been growing by 9.76% on average over the past years. This is quite good.
EPS 1Y (TTM)28.53%
EPS 3Y4.52%
EPS 5Y5.21%
EPS growth Q2Q28.77%
Revenue 1Y (TTM)51.37%
Revenue growth 3Y12.98%
Revenue growth 5Y9.76%
Revenue growth Q2Q16.27%
3.2 Future
The Earnings Per Share is expected to grow by 15.62% on average over the next years. This is quite good.
The Revenue is expected to grow by 8.55% on average over the next years. This is quite good.
EPS Next Y42.92%
EPS Next 2Y25.04%
EPS Next 3Y15.62%
EPS Next 5YN/A
Revenue Next Year32.47%
Revenue Next 2Y16.48%
Revenue Next 3Y8.55%
Revenue Next 5YN/A
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 7.43, the valuation of OTEX can be described as very cheap.
Based on the Price/Earnings ratio, OTEX is valued cheaply inside the industry as 95.29% of the companies are valued more expensively.
Compared to an average S&P500 Price/Earnings ratio of 28.15, OTEX is valued rather cheaply.
The Price/Forward Earnings ratio is 5.91, which indicates a rather cheap valuation of OTEX.
96.74% of the companies in the same industry are more expensive than OTEX, based on the Price/Forward Earnings ratio.
Compared to an average S&P500 Price/Forward Earnings ratio of 20.20, OTEX is valued rather cheaply.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 7.43 | ||
| Fwd PE | 5.91 |
4.2 Price Multiples
95.29% of the companies in the same industry are more expensive than OTEX, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, OTEX is valued cheaply inside the industry as 94.20% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 11.02 | ||
| EV/EBITDA | 8.51 |
4.3 Compensation for Growth
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The decent profitability rating of OTEX may justify a higher PE ratio.
A more expensive valuation may be justified as OTEX's earnings are expected to grow with 15.62% in the coming years.
PEG (NY)0.17
PEG (5Y)1.43
EPS Next 2Y25.04%
EPS Next 3Y15.62%
5. Dividend
5.1 Amount
OTEX has a Yearly Dividend Yield of 3.29%. Purely for dividend investing, there may be better candidates out there.
The stock price of OTEX dropped by -23.76% in the last 3 months. With lower prices the dividend yield is higher, but it may be a sign investors do not trust the long term dividend.
Compared to an average industry Dividend Yield of 12.72, OTEX pays a better dividend. On top of this OTEX pays more dividend than 96.38% of the companies listed in the same industry.
OTEX's Dividend Yield is a higher than the S&P500 average which is at 2.34.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.29% |
5.2 History
On average, the dividend of OTEX grows each year by 11.90%, which is quite nice.
OTEX has been paying a dividend for at least 10 years, so it has a reliable track record.
OTEX has not decreased its dividend in the last 3 years.
Dividend Growth(5Y)11.9%
Div Incr Years3
Div Non Decr Years3
5.3 Sustainability
158.06% of the earnings are spent on dividend by OTEX. This is not a sustainable payout ratio.
The dividend of OTEX is growing, but earnings are growing more, so the dividend growth is sustainable.
DP158.06%
EPS Next 2Y25.04%
EPS Next 3Y15.62%
OPEN TEXT CORP
NASDAQ:OTEX (5/17/2024, 7:18:15 PM)
After market: 30.48 0 (0%)30.48
-0.2 (-0.65%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners
Inst Owner Change
Ins Owners
Ins Owner Change
Market Cap8.32B
Analysts
Price Target
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.29% |
Dividend Growth(5Y)
DP
Div Incr Years
Div Non Decr Years
Ex-Date
Surprises & Revisions
EPS beat(2)
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Min EPS beat(2)
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EPS beat(16)
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Revenue beat(2)
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Revenue beat(4)
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PT rev (1m)
PT rev (3m)
EPS NQ rev (1m)
EPS NQ rev (3m)
EPS NY rev (1m)
EPS NY rev (3m)
Revenue NQ rev (1m)
Revenue NQ rev (3m)
Revenue NY rev (1m)
Revenue NY rev (3m)
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 7.43 | ||
| Fwd PE | 5.91 | ||
| P/S | |||
| P/FCF | |||
| P/OCF | |||
| P/B | |||
| P/tB | |||
| EV/EBITDA |
EPS(TTM)
EY
EPS(NY)
Fwd EY
FCF(TTM)
FCFY
OCF(TTM)
OCFY
SpS
BVpS
TBVpS
PEG (NY)0.17
PEG (5Y)1.43
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.03% | ||
| ROE | 4.07% | ||
| ROCE | |||
| ROIC | |||
| ROICexc | |||
| ROICexgc | |||
| OM | 16.49% | ||
| PM (TTM) | 2.85% | ||
| GM | 72.35% | ||
| FCFM |
ROA(3y)
ROA(5y)
ROE(3y)
ROE(5y)
ROIC(3y)
ROIC(5y)
ROICexc(3y)
ROICexc(5y)
ROICexgc(3y)
ROICexgc(5y)
ROCE(3y)
ROCE(5y)
ROICexcg growth 3Y
ROICexcg growth 5Y
ROICexc growth 3Y
ROICexc growth 5Y
OM growth 3Y
OM growth 5Y
PM growth 3Y
PM growth 5Y
GM growth 3Y
GM growth 5Y
F-Score
Asset Turnover0.36
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.01 | ||
| Debt/FCF | |||
| Debt/EBITDA | |||
| Cap/Depr | |||
| Cap/Sales | |||
| Interest Coverage | |||
| Cash Conversion | |||
| Profit Quality | |||
| Current Ratio | 1.4 | ||
| Quick Ratio | 1.4 | ||
| Altman-Z |
F-Score
WACC
ROIC/WACC
Cap/Depr(3y)
Cap/Depr(5y)
Cap/Sales(3y)
Cap/Sales(5y)
Profit Quality(3y)
Profit Quality(5y)
Growth
EPS 1Y (TTM)28.53%
EPS 3Y4.52%
EPS 5Y
EPS growth Q2Q
EPS Next Y42.92%
EPS Next 2Y
EPS Next 3Y
EPS Next 5Y
Revenue 1Y (TTM)51.37%
Revenue growth 3Y12.98%
Revenue growth 5Y
Revenue growth Q2Q
Revenue Next Year
Revenue Next 2Y
Revenue Next 3Y
Revenue Next 5Y
EBIT growth 1Y
EBIT growth 3Y
EBIT growth 5Y
EBIT Next Year
EBIT Next 3Y
EBIT Next 5Y
FCF growth 1Y
FCF growth 3Y
FCF growth 5Y
OCF growth 1Y
OCF growth 3Y
OCF growth 5Y