Skip to main content

Open Text - not so expensive today and growth is on the way

Thursday's TradeRadar Trend Busters had some BUY signals on a number of tech stocks. Among them was Open Text (OTEX). Looking at daily data, the stock has been surging, bouncing off its 200-day moving average and moving above its 50-day moving average. Bursting above a short-term down-trend earned the stock a place on the Trend Busters list.

Let's pull back a bit and take a longer term perspective. The following is the weekly chart and a nice steady, up-trend appears to be solidly in place.

Background --

Open Text Corporation develops and sells Enterprise Content Management (ECM) solutions primarily in North America and Europe. Its products enable corporations to manage traditional forms of content, such as images, office documents, graphics, and drawings, as well as to manage electronic content, including Web pages, email, and video. They facilitate document management, collaboration, social media, Web content management, digital asset management, records management, email management, archiving, capture and delivery, business process management and content reporting.

Open Text has over 46,000 corporate customers servicing 50mm users in 114 countries.

Financials --

Open Text is a $2.2B company. The PEG of less than one indicates the stock is not currently expensive. On the other hand, ratios like Price-to-Sales and Price-to-Book are not quite in the range expected for a value stock. But as a growth stock those ratios are not so important.

What is important is a measure of growth. Here, things are split. Quarterly revenue growth is strong at 15.8% year-over-year. Quarterly earnings growth, however, has been somewhat erratic and was hurt by bad results in the most recent quarter. The following tables show how revenue has been steady but earnings occasionally take a dip.






Earnings Per Share





After a bad quarter the trailing PE is a high 48 but the forward PE is a quite reasonable 12. In other words, growth expectations are strong.

The Outlook --

The company just garnered a recommendation from Canaccord Adams. The target price was upped from $38 to $48. A Canaccord analyst says they "expect a sequential pick-up in demand" and that "more material improvements in spend are projected for the first calendar quarter of 2010 based on our checks with industry participants. We believe that consulting utilization rates have begun to quickly improve in recent weeks because enterprise accounts are aggressively planning new projects that were deferred over the past 12-18 months." In other words, growth is on the way.

Furthermore, Canaccord has raised expectations that new product lines involved in the management of mobile and social media channels will begin to make more significant contribution to earnings now.

I've written before how the enterprise software sector is less volatile than many other tech sectors yet delivers solid growth. Open Text fits well into this concept as the weekly chart above shows. The Canaccord analysis seems reasonable enough. My own feeling is that Open Text is well positioned for an era where more companies are generating more and more documents that need management and collaboration across time zones and continents. As a leading company in document and content management, Open Text should be able to surf a rising tide in a growing niche.

Disclosure: no positions


Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:

Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:

Results here were actually quite good and, to make things even better, the previous month was revised upward.