Open Text Corp (OTEX) stock analysis

P/E below its 5-year median

Open Text's P/E of 9.5 is below its own 5-year median of 22.4.

P/E below the industry

Open Text's P/E of 9.5 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 27.6.

EV/EBITDA below its 5-year median

Open Text's EV/EBITDA of 10.2 is below its 5-year median of 17.0.

P/B below the industry

Open Text's price-to-book of 1.47 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 3.32.

Trading below fair value

The share price of $24.96 is below our fair value estimate of $56.19.

Margin of safety over 20%

The price is 55.6% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 5.4% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 66.4% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 30.8% over the last twelve months, against a 5-year average of 15.7% a year.

Growing slower than the industry

Revenue grew 0.1% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 9.6%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin improving

Gross margin was 73.9% over the last twelve months, against 72.5% a year earlier.

Return on equity under 15%

Return on equity was 16.2% over the last twelve months and averaged 10.3% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 8.8%, below the 10% that usually covers the cost of capital.

Return on equity above the industry

Open Text's return on equity of 16.2% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -1.2%.

Earnings grew over 5 years

Net income grew 15.7% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 12.5% over the last twelve months, against a 5-year average of 8.7%.

Net margin above the industry

Open Text's net margin of 12.5% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.8%.

High debt

Debt is 140% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 87.6% five years ago to 140%.

Debt not well covered by cash flow

Operating cash flow over the last twelve months equals 17.9% of total debt; we look for at least 20%.

Interest coverage

Interest expense is not reported separately.

Short-term assets don't cover short-term debts

Current assets are 0.85 times current liabilities.

Elevated bankruptcy risk

The Altman Z-score is 1.28; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Open Text paid dividends worth 4.4% of the share price over the last twelve months.

Yield above Treasuries

The 4.4% yield is above the 4.4% on a 1-year Treasury.

Yield in the top quarter

The top quarter of US dividend payers yield 3.8% or more; Open Text yields 4.4%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 40.9% of net income.

Covered by free cash flow

Dividends take 31.6% of free cash flow.