Is Now An Opportune Moment To Examine Open Text Corporation (NASDAQ:OTEX)?

While Open Text Corporation (NASDAQ:OTEX) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$34.04 at one point, and dropping to the lows of US$28.54. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Open Text's current trading price of US$30.49 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Open Text’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Open Text

Is Open Text Still Cheap?

Good news, investors! Open Text is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.05x is currently well-below the industry average of 41.88x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Open Text’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Open Text generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Open Text's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since OTEX is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on OTEX for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy OTEX. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for Open Text (of which 1 is significant!) you should know about.

If you are no longer interested in Open Text, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.