Information Management Software provider
Open Text Corp.
) is an attractive pick for value investors. This Zacks #1 Rank
(Strong Buy) is expected to benefit from the strong growth
opportunities in its core end-market, as well as its innovative
product pipeline, recurring maintenance revenue and accretive
Moreover, the stock is significantly undervalued, with a forward
price-to-earnings (P/E) multiple of just 10.3 and low price-to-book
(P/B) multiple of 2.69.
Outlook Remains Bright
Open Text reported fourth quarter 2012 results on August 9, with
earnings of 87 cents per share missing the Zacks Consensus Estimate
However, revenue increased 7% from the prior-year quarter to $305.6
million, driven by solid maintenance (up 8.1% year over year) and
services revenue (up 17.3% year over year). This fully offset a 2%
year over year decline in license revenue.
Although Open Text did not provide a specific guidance, the company
expects its top-line to get a boost from the strong growth in the
enterprise information management market (from $13.0 billion in
2012 to $19.0 billion by 2016). Furthermore, the recently completed
acquisition of Atlanta-based EasyLink is expected to expand Open
Text's cloud-based product offerings going forward.
Earnings Estimates Moving Up
For 2013, the Zacks Consensus Estimate jumped 6.0% in the last 30
days to $5.29, representing a 31.3% year-over-year growth. For
2014, the Zacks Consensus Estimate stands at $5.58, or a growth
In addition to low P/E and P/B multiples, the stock looks
attractive even on a price-to-sales (P/S) basis. Its P/S multiple
is just 2.69, much lower than the industry average of 4.13.
Moreover, Open Text's PEG ratio of just 0.88 indicates that the
stock is reasonably valued given the expected growth of 11.7%.
Waterloo, Ontario-based Open Text Corp. was incorporated in 1991.
Open Text develops software solutions that help enterprises to
effectively organize and manage information. Its products primarily
cater to the Enterprise Information Management (EIM) market. The
company has a market cap of $3.17 billion and it competes with IBM
), EMC Corp. (
) and Hewlett-Packard Co. (
OPEN TEXT CORP (OTEX): Free Stock Analysis
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