Open Text (OTEX) AI Stock Analysis

• Market Cap: $9.53B
• Dividend Yield: 3.81%
• Average Volume (3M): 910.92K
• Price to Earnings (P/E): 10.9
• Beta (1Y): 1.27
• Revenue Growth: -8.74%
• EPS Growth: 307.82%
• Country: CA
• Employees: 21,700
• Sector: Technology
• Sector Strength: 67
• Industry: Software - Application
• EPS (TTM): 1.14
• Shares Outstanding: 259,142,430
• 10 Day Avg. Volume: 664,848
• 30 Day Avg. Volume: 910,924
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.82
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 4.13
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $41.59
• Price Target Upside: 9.96% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 6

Open Text presents a solid financial foundation with strong operational efficiency and profitability. The company's strategic focus on AI and cloud growth is promising. However, challenges such as revenue miss and macroeconomic disruptions temper the overall positive outlook. The stock could be appealing due to its low valuation and healthy dividend yield.

Positive Factors

Earnings

Q2/25 results were above consensus, showing a beat in revenue and EBITDA.

Growth Potential

Upcoming product releases, increased sales capacity, and a strong pipeline for cloud AI deals are key drivers for the anticipated acceleration.

Valuation

OTEX's valuation is considered undemanding at current levels given its recurring revenue profile, profitability, and plans to return more capital to shareholders.

Negative Factors

Growth Risks

Better organic growth will be needed for the stock to work, and there is potential risk to the implied growth re-acceleration that OTEX is guiding for.

Guidance

Q3/25 guidance was below expectations, indicating organic growth challenges.

Product Weakness

OTEX reduced its FY2025 guidance due to incremental weakness within the ADM and ITOM product portfolios.

Open Text Business Overview & Revenue Model

Company Description

Open Text Corporation engages in the designs, develops, markets, and sells information management software and solutions. It offers content services; business network that manages data within the organization and outside the firewall; security and protection solutions for defending against cyber threats, and preparing for business continuity and response in the event of a breach; digital investigation and forensic security solutions; OpenText security solutions to address information cyber resilience needs; Carbonite and Webroot products; and OpenText Information Management software platform. The company also provides eDiscovery platform that provides forensics and unstructured data analytics; OpenText Developer Cloud; key developer API services; AI and analytics that leverages structured or unstructured data; digital process automation solutions, which enables organizations to transform into digital data-driven businesses; and OpenText Digital Experience platform. In addition, it offers customer support programs, including access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble tickets; and consulting and learning services relating to the implementation, training, and integration of its licensed product offerings, as well as cloud services. The company serves organizations, enterprise and mid-market companies, public sector agencies, small and medium-sized businesses, and direct consumers in Canada, the United States, the United Kingdom, Germany, rest of Europe, the Middle East, Africa, and internationally. It has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, Accenture plc, ATOS, Capgemini Technology Services SAS, Cognizant Technology Solutions U.S. Corp., Deloitte Consulting LLP, and Tata Consultancy Services. Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.

How the Company Makes Money

OpenText makes money primarily through the sale of its software products and related services. The company's revenue model is largely based on licensing fees, where customers pay for the right to use OpenText's software solutions. This includes both perpetual licenses and subscription-based models, which provide a steady stream of recurring revenue. In addition to software sales, OpenText generates income through professional services, including consulting, implementation, and support services. The company also earns revenue from its cloud offerings, as businesses increasingly shift towards cloud-based solutions. Strategic partnerships with large technology firms and acquisitions of complementary businesses also play a significant role in OpenText's revenue generation by expanding its product offerings and customer base.

Open Text Financial Statement Overview

Summary

Open Text demonstrates strong financial performance with robust revenue growth, high profitability margins, and effective cash flow management. The balance sheet is stable, though increased leverage warrants monitoring. Overall, the company is well-positioned financially, with potential growth and profitability supported by strong operational efficiency.

Income Statement

The company exhibits strong revenue growth with a TTM revenue of $5.22 billion, up from $4.48 billion in the previous year, indicating a 16.52% growth rate. Gross profit margin remains robust at 73.23%, reflecting efficient cost management. The net profit margin improved to 12.55%, with a significant increase in net income. EBIT and EBITDA margins of 17.33% and 32.03% respectively, suggest healthy operational efficiency. Overall, the income statement reflects a positive financial trajectory with strong profitability.

Balance Sheet

The balance sheet shows a solid equity ratio of 30.02%, indicating a stable financial foundation. The debt-to-equity ratio at 1.61 reflects moderate leverage, which is common in the industry. Return on equity (ROE) has improved to 15.87%, showcasing effective use of equity capital. However, total debt has increased, which may pose future financial risk if not managed carefully. Overall, the balance sheet demonstrates stability with moderate leverage risks.

Cash Flow

The company maintains strong cash flow generation with a TTM operating cash flow of $857.65 million. Free cash flow has grown, indicating a positive free cash flow growth rate. The operating cash flow to net income ratio of 1.31 suggests efficient conversion of earnings to cash. The free cash flow to net income ratio is 1.08, reflecting strong cash conversion. Despite investing and financing challenges, the cash flow statement shows a healthy cash position.

Breakdown
Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
5.77B	4.48B	3.49B	3.39B	3.11B
	Gross Profit
4.19B	3.17B	2.43B	2.35B	2.11B
	EBIT
887.09M	516.29M	644.77M	740.90M	503.53M
	EBITDA
2.10B	1.26B	1.18B	1.33B	1.02B
	Net Income Common Stockholders
465.09M	150.38M	397.09M	310.67M	234.22M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.28B	1.23B	1.69B	1.61B	1.69B
	Total Assets
14.21B	17.09B	10.18B	9.61B	10.23B
	Total Debt
6.69B	9.25B	4.47B	3.87B	4.48B
	Net Debt
5.41B	8.01B	2.78B	2.26B	2.78B
	Total Liabilities
10.01B	13.07B	6.15B	5.51B	6.23B
	Stockholders Equity
4.20B	4.02B	4.03B	4.10B	4.01B
Cash Flow		Free Cash Flow
808.40M	655.37M	888.70M	812.45M	881.83M
	Operating Cash Flow
967.69M	779.21M	981.81M	876.12M	954.54M
	Investing Cash Flow
2.06B	-5.65B	-970.96M	-68.77M	-1.47B
	Financing Cash Flow
-2.96B	4.40B	138.46M	-924.55M	1.27B

Open Text Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 37.82
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:OTEX, the sentiment is Positive. The current price of 37.82 is above the 20-day moving average (MA) of 36.42, above the 50-day MA of 36.54, and below the 200-day MA of 40.41, indicating a neutral trend. The MACD of 0.32 indicates Negative momentum. The RSI at 57.27 is Neutral, neither overbought nor oversold. The STOCH value of 67.27 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:OTEX.

Open Text Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
OTEX	74 Outperform	$9.53B	10.89	15.87%	3.81%	-8.74%	307.82%
KXS	71 Outperform	C$5.28B	157.81	2.32%	―	15.14%	-31.45%
LSPD	63 Neutral	C$2.05B	―	-5.18%	―	23.95%	39.68%
Sector *	60 Neutral	$10.94B	10.37	-6.73%	2.98%	7.75%	-12.61%

Open Text Corporate Events

OpenText Appoints New Board Member for Strategic Growth

OpenText Corporation has appointed Fletcher Previn, Senior VP and CIO of Cisco Systems, to its board of directors, highlighting the company’s focus on refreshing its board with diverse skill-sets. Previn brings over 20 years of IT experience, including a significant tenure at IBM, and is expected to contribute to OpenText’s growth and modernization strategies.