Is Open Text Corporation (OTEX) a good value investor share?
Investing in value is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that go unnoticed and are attractive buys, or offer great discounts off their fair value?
One way to find these companies is to look at several key financial indicators and ratios, many of which are crucial in the process of selecting value stocks. Let’s put Open text company. DXC stock into this equation and find out if it’s a good choice for value investors right now, or if investors who subscribe to this methodology should look elsewhere for the best choices:
P / E ratio
A key metric that value investors always look at is the price-to-earnings ratio, or PE for short. It shows us how much investors are willing to pay for every dollar in profit in any given stock, and it’s easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the industry / sector average; and c) how it compares to the market as a whole.
On this front, Open Text Corp has a 12-month PE ratio of 18.21, as you can see in the chart below:
This level actually compares favorably to the market as a whole, as the PE for the S&P 500 is around 28.10. If we focus on the long term PE trend, Open Text Corp’s current PE level puts it below its midpoint over the past five years. Also, the current level is quite lower than the highs of this stock, which suggests that it could be a good entry point.
However, the stock’s PE also compares unfavorably with Zacks’ IT and tech sector’s 12-month PE ratio of 36.9. At the very least, it indicates that the title is currently slightly undervalued compared to its peers.
We also have to point out that Open Text Corp has a futures PE ratio (price to earnings for this year) of just 14.62, so it’s fair to say that a slightly more value-driven path may be at come for shares of Open Text Corp in the near term too.
P / S ratio
Another key indicator to note is the price / sales ratio. This approach compares the price of a given stock to its total sales, where a lower reading is generally considered better. Some people like this value metric more than others because it looks at sales, something that is much harder to manipulate with accounting tricks than profits.
At present, Open Text Corp has a P / S ratio of approximately 3.98. That’s significantly lower than the S&P 500 average, which currently sits at 5.65. Also, as we can see in the graph below, that number is slightly below the highs of this particular stock in recent years.
Broad value outlook
Overall, Open Text Corp currently has a value score of B which places it in the top 40% of all stocks we cover from this look. This makes Open Text Corp a solid choice for value investors, and some of its other key metrics show that quite clearly as well.
For example, the P / CF ratio for Open Text Corp is only 9.96, which is below the industry average of 32.42. Obviously, OTEX is a solid choice in terms of value from several angles.
What about the action overall?
While Open Text Corp can be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it should be noted that the company has a growth score of B and
Momentum Score of A. This gives Open Text Corp a Zacks VGM score – or its overall root score – of A. (You can read more about Zacks style scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter estimate has seen no upward revision in the past sixty days from one downward revision, while the current year estimate has seen two upward revisions per year. compared to no downward revisions during the same period.
This had a noticeable impact on the consensus estimate, as the current quarter’s consensus estimate fell 4.1% in the past two months, while the current year’s estimate increased by 1. , 2% in the last two months. You can see the trend of the consensus estimate and recent stock price development in the chart below:
Open Text Corporation price and consensus
Open Text Corporation price-consensus-chart | Quote from the company Open Text
Due to these downward valuation trends, the stock has a Zacks Rank # 3 (Hold), which is why we are looking for short term online performance of the company.
Open Text Corp is an inspired choice for value investors, as its incredible range of statistics is hard to beat on this front. However, with a slow industry ranking (among the lowest 14%) and a Zacks # 3 ranking, it’s hard to get too excited about this business as a whole.
So, value investors might want to wait for estimates, analyst sentiment, and broader factors for that name first, but once that happens, this stock could be a compelling choice.
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