Open Text (OTEX) AI Stock Analysis

• Market Cap: $10.19B
• Dividend Yield: 3.68%
• Average Volume (3M): 819.20K
• Price to Earnings (P/E): 11.6
• Beta (1Y): 1.31
• Revenue Growth: -8.74%
• EPS Growth: 307.82%
• Country: CA
• Employees: 21,700
• Sector: Technology
• Sector Strength: 77
• Industry: Software - Application
• EPS (TTM): 1.14
• Shares Outstanding: 259,142,430
• 10 Day Avg. Volume: 665,586
• 30 Day Avg. Volume: 819,200
• PEG Ratio: -27.13
• Price to Book (P/B): 1.76
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 9.92
• Enterprise Value/Market Cap: 1.22
• Enterprise Value/Revenue: 0.56
• Enterprise Value/Gross Profit: 3.25
• Enterprise Value/Ebitda: 1.77
• 1Y Price Target: $39.95
• Price Target Upside: 1.35% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 7

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

Quarterly performance

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

Valuation

OTEX's valuation is considered undemanding given its recurring revenue profile and profitability.

Negative Factors

Guidance

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

Lack of catalysts

There is a lack of a clear catalyst to drive value stocks like OTEX higher.

Product portfolio 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

OpenText Corporation (OTEX) is a Canadian enterprise information management company that develops and sells software solutions and services to manage, process, and store digital information. Operating in sectors such as information technology and services, OpenText offers core products including enterprise content management (ECM), digital process automation, business network, and artificial intelligence solutions. The company serves a diverse range of industries, providing tools that enhance productivity and enable businesses to leverage data for better decision-making.

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
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
5.22B	5.77B	4.48B	3.49B	3.39B	3.11B
	Gross Profit
3.82B	4.19B	3.17B	2.43B	2.35B	2.11B
	EBIT
904.39M	887.09M	516.29M	644.77M	740.90M	503.53M
	EBITDA
1.67B	2.10B	1.26B	1.18B	1.33B	1.02B
	Net Income Common Stockholders
655.26M	465.09M	150.38M	397.09M	310.67M	234.22M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.28B	1.28B	1.23B	1.69B	1.61B	1.69B
	Total Assets
13.75B	14.21B	17.09B	10.18B	9.61B	10.23B
	Total Debt
6.65B	6.69B	9.25B	4.47B	3.87B	4.48B
	Net Debt
5.37B	5.41B	8.01B	2.78B	2.26B	2.78B
	Total Liabilities
9.62B	10.01B	13.07B	6.15B	5.51B	6.23B
	Stockholders Equity
4.13B	4.20B	4.02B	4.03B	4.10B	4.01B
Cash Flow		Free Cash Flow
708.67M	808.40M	655.37M	888.70M	812.45M	881.83M
	Operating Cash Flow
857.65M	967.69M	779.21M	981.81M	876.12M	954.54M
	Investing Cash Flow
2.06B	2.06B	-5.65B	-970.96M	-68.77M	-1.47B
	Financing Cash Flow
-2.76B	-2.96B	4.40B	138.46M	-924.55M	1.27B

Open Text Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 39.42
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 39.42 is above the 20-day moving average (MA) of 37.60, above the 50-day MA of 36.81, and below the 200-day MA of 40.32, indicating a neutral trend. The MACD of 0.79 indicates Negative momentum. The RSI at 63.82 is Neutral, neither overbought nor oversold. The STOCH value of 90.71 is Negative, 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
DSG	77 Outperform	$13.56B	70.19	10.92%	―	16.07%	25.71%
ENGH	75 Outperform	$1.47B	17.34	14.76%	4.00%	8.11%	15.83%
OTEX	74 Outperform	$10.19B	11.58	15.87%	3.68%	-8.74%	307.82%
KXS	73 Outperform	C$5.56B	402.15	2.32%	―	15.14%	-31.45%
DCBO	67 Neutral	$1.13B	35.32	41.12%	―	20.52%	246.69%
LSPD	63 Neutral	C$2.08B	―	-5.18%	―	23.95%	39.68%
Sector *	60 Neutral	$11.59B	10.34	-7.15%	2.94%	7.49%	-10.88%

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.