A Bright Future for Open Text Corporation (USA) (OTEX)

Valuation

Open Text Corporation (USA) (NASDAQ:OTEX) is attractively valued. The stock trades at 12 forward price-to-earnings ratio. If we compare this to Oracle’s 11.78 forward price-to-earnings ratio, IBM’s 11.39 forward price-to-earnings ratio and EMC’s 11.95 forward price-to-earnings ratio, we would see that the market values those companies almost equally. Open Text is a much smaller company, however, and it is therefore easier for Open Text to deliver growth. The ECM market is expected to grow at a fast pace, and Open Text is more exposed to this market in comparison to its competitors because they provide a ton of other solutions. This is why Open Text’s gain from ECM growth will be more significant.

Bottom line

Open Text operates in a very interesting market that is expected to grow at a good pace. This is rare in today’s environment of cutting IT budget costs. The company has recently initiated a dividend that yields 1.67%, in line with IBM’s 1.82% and EMC’s 1.62%. The stock is attractively valued, and, in my opinion, will continue to build on its recent momentum.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Open Text . The Motley Fool owns shares of EMC, International Business Machines (NYSE:IBM)., Open Text , and Oracle. Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article A Bright Future for Open Text originally appeared on Fool.com is written by Vladimir Zernov.

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