Open Text (TSX:OTEX)

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thedude99
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Open Text (TSX:OTEX)

Post by thedude99 » 04 Oct 2017 21:22

This is trading at a fairly low P/E and if you look on Stockchase either Top Pick or Buy rating from all the guests. Thoughts? I know for myself primarily being a Cdn focused investor I don't have nearly enough exposure to Tech

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AltaRed
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Re: TSE:OTX Open Text

Post by AltaRed » 04 Oct 2017 21:35

Stockchase is not where i'd go for serious analysis/research on a stock. But that aside, what has OTEX done in recent times and what is its growth plan from its MD&A from the lastest quarterly report? How much of its business is with the USA and could it be caught in a NAFTA bun fight?
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Dudsy
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Re: Open Text (TSX:OTEX)

Post by Dudsy » 05 Oct 2017 13:29

P/E of 12. 1.6% dividend yield. Earnings growth of about 10% expected next year. Management commentary for next year is fairly positive.

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brad911
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Re: Open Text (TSX:OTEX)

Post by brad911 » 05 Oct 2017 14:39

and they are hiring a ton!
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AltaRed
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Re: Open Text (TSX:OTEX)

Post by AltaRed » 05 Oct 2017 15:19

Dudsy wrote:
05 Oct 2017 13:29
P/E of 12. 1.6% dividend yield. Earnings growth of about 10% expected next year. Management commentary for next year is fairly positive.
I don't buy tech stocks generally...but I did go read parts of the Annual report out of curiousity. How do you decipher scrambled eggs? I didn't understand 10% of it.

But the theme I got is the importance of recurring revenue (makes sense) and a projection to increase both it AND hopefully margin. And maybe integrating and leveraging their latest acquisition well. Yeah, I sure hope so.... And maybe another good acquisition or two. I didn't get to their methodology for integrating (absorption of) goodwill in their income statement over time. Hugely important in a growth by acquisition story.

Overall, a good sounding story, but it seems to me growth is only as good as their next idea, or acquisition. Am I missing something more substantive than that?
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Re: Open Text (TSX:OTEX)

Post by Dudsy » 05 Oct 2017 16:35

[/quote]Overall, a good sounding story, but it seems to me growth is only as good as their next idea, or acquisition. Am I missing something more substantive than that?[/quote]

In a nutshell, you're right. Their organic growth is close to zero. The key is redeploying a fairly large cash flow. OTEX tends not to issue shares and In the last five years they've doubled their cash flow. Will it continue... I wish I knew.

In my opinion, the best allocator of capital in the Cdn tech space is CSU. I highly encourage anyone to read Mark Leonard's annual letter to get a sense of his thought process.

http://www.csisoftware.com/category/pres-letters/

Cash flow from Ops has grown at a compounded rate of 33% a year over the last 10 years and they haven't issued a single share over that timeframe.

Years ago, I came to the conclusion this man will always be smarter at allocating capital than I can ever be.

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Re: Open Text (TSX:OTEX)

Post by Dudsy » 05 Oct 2017 16:48

brad911 wrote:
05 Oct 2017 14:39
and they are hiring a ton!
Headcount has gone from 8,855 to 10,904 yoy.

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