5 Undervalued Canadian Stocks To Buy Now

2. Open Text Corporation (NASDAQ:OTEX)

Number of Hedge Fund Shareholders: 22

Analysts’ Consensus Upside: 74.5%

Open Text Corporation (NASDAQ:OTEX) tied an all-time high in hedge fund ownership during Q3, which it previously reached in both 2015 and 2019. Several of the company’s top shareholders were also expanding their positions during Q3, most notably Israel Englander’s Millennium Management, which hiked its stake by 7,434% to 1.89 million shares.

Shares of Waterloo, Ontario-based enterprise software company Open Text Corporation (NASDAQ:OTEX) have slumped by 41% this year, including by 14% on August 26 after investors reacting harshly to the company’s purchase of British software company Micro Focus at a 99% premium. Several analysts and major OTEX shareholders like the deal however, which will greatly expand Open Text’s operating scale and grow its revenue.

Jarislowsky Fraser Ltd, which owns a 5.6% stake in Open Text Corporation (NASDAQ:OTEX), believes the deal is appealing over the long-term, believing both companies’ results will improve meaningfully via the merger. RBC Capital Markets noted that despite the premium, Open Text acquired Micro Focus at a low EBITDA multiple of just 6.3x. CIBC characterized Micro Focus as a multiyear turnaround story and cut its price target on OTEX shares to $44 from $51, which still implies greater than 50% upside.