NasdaqGS:OTEX

Stock Analysis Report

Executive Summary

Open Text Corporation provides a suite of software products and services.

Rewards

Trading at 1.3% below its fair value

Earnings are forecast to grow 22.37% per year

Earnings grew by 33.7% over the past year

Risk Analysis

Has a high level of debt

Unstable dividend track record



Snowflake Analysis

Proven track record with adequate balance sheet.


Similar Companies

Share Price & News

How has Open Text's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: OTEX has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-0.7%

OTEX

0.2%

US Software

1.1%

US Market


1 Year Return

26.9%

OTEX

28.8%

US Software

17.8%

US Market

Return vs Industry: OTEX underperformed the US Software industry which returned 28.8% over the past year.

Return vs Market: OTEX exceeded the US Market which returned 17.8% over the past year.


Shareholder returns

OTEXIndustryMarket
7 Day-0.7%0.2%1.1%
30 Day2.3%1.3%1.4%
90 Day3.2%4.0%3.9%
1 Year29.1%26.9%30.7%28.8%20.3%17.8%
3 Year43.9%37.0%125.1%116.1%44.8%35.4%
5 Year64.5%51.7%185.0%164.8%71.3%52.4%

Price Volatility Vs. Market

How volatile is Open Text's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Open Text undervalued compared to its fair value and its price relative to the market?

1.3%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: OTEX ($42.5) is trading below our estimate of fair value ($43.06)

Significantly Below Fair Value: OTEX is trading below fair value, but not by a significant amount.


Price To Earnings Ratio

PE vs Industry: OTEX is good value based on its PE Ratio (35.4x) compared to the Software industry average (44.5x).

PE vs Market: OTEX is poor value based on its PE Ratio (35.4x) compared to the US market (18.4x).


Price to Earnings Growth Ratio

PEG Ratio: OTEX is poor value based on its PEG Ratio (1.6x)


Price to Book Ratio

PB vs Industry: OTEX is good value based on its PB Ratio (2.9x) compared to the US Software industry average (5.7x).


Next Steps

Future Growth

How is Open Text forecast to perform in the next 1 to 3 years based on estimates from 8 analysts?

22.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: OTEX's forecast earnings growth (22.4% per year) is above the savings rate (1.7%).

Earnings vs Market: OTEX's earnings (22.4% per year) are forecast to grow faster than the US market (14.2% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: OTEX's revenue (3.2% per year) is forecast to grow slower than the US market (7.4% per year).

High Growth Revenue: OTEX's revenue (3.2% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if OTEX's Return on Equity is forecast to be high in 3 years time


Next Steps

Past Performance

How has Open Text performed over the past 5 years?

-1.4%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: OTEX has high quality earnings.

Growing Profit Margin: OTEX's current net profit margins (11.2%) are higher than last year (8.5%).


Past Earnings Growth Analysis

Earnings Trend: OTEX's earnings have declined by -1.4% per year over the past 5 years.

Accelerating Growth: OTEX's earnings growth over the past year (33.7%) exceeds its 5-year average (-1.4% per year).

Earnings vs Industry: OTEX earnings growth over the past year (33.7%) exceeded the Software industry 15.8%.


Return on Equity

High ROE: OTEX's Return on Equity (8.3%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Open Text's financial position?


Financial Position Analysis

Short Term Liabilities: OTEX's short term assets ($1.5B) exceed its short term liabilities ($951.9M).

Long Term Liabilities: OTEX's short term assets ($1.5B) do not cover its long term liabilities ($3.2B).


Debt to Equity History and Analysis

Debt Level: OTEX's debt to equity ratio (66.9%) is considered high.

Reducing Debt: OTEX's debt to equity ratio has reduced from 77% to 66.9% over the past 5 years.

Debt Coverage: OTEX's debt is well covered by operating cash flow (32.2%).

Interest Coverage: OTEX's interest payments on its debt are well covered by EBIT (4.9x coverage).


Balance Sheet

Inventory Level: OTEX has a low level of unsold assets or inventory.

Debt Coverage by Assets: OTEX's debt is not covered by short term assets (assets are 0.6x debt).


Next Steps

Dividend

What is Open Text's current dividend yield, its reliability and sustainability?

1.64%

Current Dividend Yield


Dividend Yield vs Market

company1.6%marketbottom25%1.4%markettop25%3.7%industryaverage1.4%forecastin3Years1.9%

Current dividend yield vs market & industry

Notable Dividend: OTEX's dividend (1.64%) is higher than the bottom 25% of dividend payers in the US market (1.44%).

High Dividend: OTEX's dividend (1.64%) is low compared to the top 25% of dividend payers in the US market (3.67%).


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, OTEX has been paying a dividend for less than 10 years.

Growing Dividend: OTEX's dividend payments have increased, but the company has only paid a dividend for 7 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonable payout ratio (54.3%), OTEX's dividend payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: OTEX's dividends in 3 years are forecast to be well covered by earnings (28.1% payout ratio).


Next Steps

Management

What is the CEO of Open Text's salary, the management and board of directors tenure and is there insider trading?

5.1yrs

Average management tenure


CEO

Mark Barrenechea (54yo)

7.9yrs

Tenure

US$8,099,674

Compensation

Mr. Mark J. Barrenechea has been the Chief Executive Officer and President of OpenText Public Sector Solutions, Inc. since January 2, 2012 and has been its Chief Technology Officer since January 4, 2016. M ...


CEO Compensation Analysis

Compensation vs Market: Mark's total compensation ($USD8.10M) is about average for companies of similar size in the US market ($USD10.90M).

Compensation vs Earnings: Mark's compensation has been consistent with company performance over the past year.


Management Age and Tenure

5.1yrs

Average Tenure

54yo

Average Age

Experienced Management: OTEX's management team is seasoned and experienced (5.1 years average tenure).


Board Age and Tenure

11.0yrs

Average Tenure

59yo

Average Age

Experienced Board: OTEX's board of directors are seasoned and experienced ( 11 years average tenure).


Insider Trading

Insider Buying: OTEX insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellUS$595,41413 Nov 19
Gail Hamilton
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13,990
Max PriceUS$42.56
SellUS$194,59109 Sep 19
David Jamieson
EntityIndividual
Role
Chief Information Officer
Senior VP & Chief Information Officer
Shares4,673.26
Max PriceUS$41.64
SellUS$36,80014 Jun 19
Savinay Berry
EntityIndividual
Shares904
Max PriceUS$40.71
SellUS$619,53213 Jun 19
Stephen Sadler
EntityIndividual
Role
Member of the Board of Directors
Non Independent Director
Shares15,000
Max PriceUS$41.30
SellUS$78,06122 May 19
Paul Duggan
EntityIndividual
Shares1,903
Max PriceUS$41.02
SellUS$809,57622 May 19
Simon Harrison
EntityIndividual
Role
Head of Sales
Executive Vice President of Worldwide Sales
Shares20,000
Max PriceUS$40.48
BuyUS$252,57121 May 19
Michael Slaunwhite
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares6,362
Max PriceUS$39.70
SellUS$57,34214 May 19
Paul Duggan
EntityIndividual
Shares1,430
Max PriceUS$40.10
BuyUS$347,30313 May 19
Michael Slaunwhite
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares8,638
Max PriceUS$40.23
SellUS$18,01013 May 19
Aditya Maheshwari
EntityIndividual
Shares447
Max PriceUS$40.29
SellUS$105,32810 May 19
Christopher McGourlay
EntityIndividual
Role
Senior Key Executive
Executive Vice President of Customer Operations
Shares2,640
Max PriceUS$39.90
SellUS$7,566,03208 Mar 19
Paul Jenkins
EntityIndividual
Role
Chairman of the Board
Independent Chairman of the Board
Shares199,300
Max PriceUS$38.07
SellUS$379,68807 Mar 19
Randy Fowlie
EntityIndividual
Role
Lead Director
Lead Director
Shares10,000
Max PriceUS$37.97
SellUS$207,96728 Feb 19
Christopher McGourlay
EntityIndividual
Role
Senior Key Executive
Executive Vice President of Customer Operations
Shares5,622
Max PriceUS$36.99
SellUS$197,36214 Feb 19
David Jamieson
EntityIndividual
Role
Chief Information Officer
Senior VP & Chief Information Officer
Shares5,353
Max PriceUS$36.87
SellUS$303,99507 Feb 19
David Jamieson
EntityIndividual
Role
Chief Information Officer
Senior VP & Chief Information Officer
Shares8,205
Max PriceUS$37.05

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Mark Barrenechea (54yo)

    Vice Chairman

    • Tenure: 7.9yrs
    • Compensation: US$8.10m
  • Gordon Davies (57yo)

    Executive VP

    • Tenure: 10.3yrs
    • Compensation: US$2.51m
  • Madhu Ranganathan (54yo)

    Executive VP

    • Tenure: 1.7yrs
    • Compensation: US$2.12m
  • Patricia Nagle (54yo)

    Senior VP & Chief Marketing Officer

    • Tenure: 1.8yrs
  • Christopher McGourlay (50yo)

    Executive Vice President of Customer Operations

    • Tenure: 7.8yrs
  • Muhi Majzoub (59yo)

    Executive VP & Chief Product Officer

    • Tenure: 7.5yrs
    • Compensation: US$2.68m
  • Ted Harrison (49yo)

    Executive Vice President of Worldwide Sales

    • Tenure: 2.2yrs
    • Compensation: US$1.99m
  • David Jamieson (54yo)

    Senior VP & Chief Information Officer

    • Tenure: 5.1yrs
    • Compensation: US$1.62m
  • Brian Sweeney (55yo)

    Senior VP & Chief Human Resources Officer

    • Tenure: 1.2yrs
  • Harry Blount

    Senior VP & Global Head of Investor Relations

    • Tenure: 0yrs

Board Members

  • Mark Barrenechea (54yo)

    Vice Chairman

    • Tenure: 7.9yrs
    • Compensation: US$8.10m
  • Kate Stevenson (57yo)

    Independent Director

    • Tenure: 11yrs
    • Compensation: US$369.90k
  • Deborah Weinstein (59yo)

    Independent Director

    • Tenure: 10yrs
    • Compensation: US$382.80k
  • Gail Hamilton (69yo)

    Independent Director

    • Tenure: 13yrs
    • Compensation: US$358.52k
  • Stephen Sadler (68yo)

    Non Independent Director

    • Tenure: 22.3yrs
    • Compensation: US$984.16k
  • Randy Fowlie (59yo)

    Lead Director

    • Tenure: 0yrs
    • Compensation: US$393.81k
  • Michael Slaunwhite (58yo)

    Independent Director

    • Tenure: 21.8yrs
    • Compensation: US$389.91k
  • Carl Tinggren (61yo)

    Independent Director

    • Tenure: 2.8yrs
    • Compensation: US$329.92k
  • Tom Jenkins (60yo)

    Independent Chairman of the Board

    • Tenure: 21.9yrs
    • Compensation: US$559.78k
  • Harmit Singh (56yo)

    Independent Director

    • Tenure: 1.3yrs
    • Compensation: US$351.32k

Company Information

Open Text Corporation's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Open Text Corporation
  • Ticker: OTEX
  • Exchange: NasdaqGS
  • Founded: 1991
  • Industry: Application Software
  • Sector: Software
  • Market Cap: US$11.439b
  • Shares outstanding: 269.41m
  • Website: https://www.opentext.com

Number of Employees


Location

  • Open Text Corporation
  • 275 Frank Tompa Drive
  • Waterloo
  • Ontario
  • N2L 0A1
  • Canada

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
OTEXNasdaqGS (Nasdaq Global Select)YesCommon SharesUSUSDJan 1996
OTEXTSX (The Toronto Stock Exchange)YesCommon SharesCACADJan 1996
OTXDB (Deutsche Boerse AG)YesCommon SharesDEEURJan 1996

Biography

Open Text Corporation provides a suite of software products and services. The company offers content services; business network, a cloud-based platform that facilitates collaboration and exchange of inform ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/10 23:43
End of Day Share Price2019/12/10 00:00
Earnings2019/09/30
Annual Earnings2019/06/30


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.