July 27, 2023
Top 10 Stock Open Text Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Open Text – Top 10 Stock in SDG 3: Good Health and Well-being
Open Text is listed as a top 10 stock on July 27, 2023 in the market index SDG 3 because of its high performance in at least one of the Obermatt investment strategies. While half the consolidated Obermatt Ranks are above-average, investor sentiment is below average and thus a signal for caution. Based on the Obermatt 360° View of 90 (top 90% performer), Obermatt assesses an overall strong buy recommendation for Open Text on July 27, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Application Software |
| Index | Human Rights, SDG 13, SDG 2, SDG 3, SDG 4, SDG 5, NASDAQ, TSX Composite |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Open Text Strong Buy
| 360 METRICS | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 98 |
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| GROWTH | ||||||||
| GROWTH | 71 |
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| SAFETY | ||||||||
| SAFETY | 41 |
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| SENTIMENT | ||||||||
| SENTIMENT | 45 |
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| 360° VIEW | ||||||||
| 360° VIEW | 90 |
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ANALYSIS: With an Obermatt 360° View of 90 (better than 90% compared with alternatives) for 2023, overall professional sentiment and financial characteristics for the stock Open Text are very positive. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Open Text. The consolidated Value Rank has an attractive rank of 98, which means that the share price of Open Text is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 98% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 71, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. But the professional market sentiment is below average compared with other stock investment alternatives with a Sentiment Rank of 45. Professional investors are more confident in 55% other stocks. Worryingly, the company has risky financing, with a Safety rank of 41. This means 59% of comparable companies have a safer financing structure than Open Text. ...read more
RECOMMENDATION: With a consolidated 360° View of 90, Open Text is better positioned than 90% of all alternative stock investment opportunities based on the Obermatt Method. Even though half of the consolidated Obermatt Ranks are above-average, namely the Value Rank at 98 and the Growth Rank above-average at 71, the picture is still mixed. The professional investor community is skeptical, with the Sentiment Rank below-average at 45. In addition, the company financing structure is on the riskier side (Safety Rank of 41). Since the company is good value and the share price low, it should attract investors, yet professionals are skeptical. One may be tempted by above-average growth, but that could also change quickly, as past performance is not a good indicator of future performance. Since the financing structure is on the risky side, investors should be careful with this decision and conduct further research if they are serious about investing in this company. ...read more
Sentiment Strategy: Professional Market Sentiment for Open Text only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 45 (better than 45% compared with alternatives), overall professional sentiment and engagement for the stock Open Text is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Open Text. Analyst Opinions are at a rank of 33 (worse than 67% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 50, which means that stock research experts are more positive in their investment recommendations in the company. In other words, they are getting more optimistic of stock investments in Open Text. More encouragingly, the Professional Investors rank is 76, which means that professional investors hold more stock in this company than in 76% of alternative investment opportunities. Pros tend to favor investing in this company. But Market Pulse is on the lower side with a rank of 27, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 73% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 45 (less encouraging than 55% compared with investment alternatives), Open Text has a reputation among professional investors that is below that of its competitors. The sentiment signals are mixed for Open Text. While analysts and the news channels are negative, there is a change in what analysts think. Above-average institutional investors in this company support them. Sentiment signals remain mixed with analysts and news channels pessimistic, though improving, and professional investors above average. ...read more
Value Strategy: Open Text Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 98 (better than 98% compared with alternatives) for 2023, Open Text shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators that are all above average for Open Text. Price-to-Sales is 75 which means that the stock price compared with what market professionals expect for future sales is lower than for 75% of comparable companies, indicating a good value for Open Text's revenue size. The same is valid for expected Price-to-Profits, more favorable than for 97% of alternatives, and this is also true for the Price-to-Book capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 57. Compared with other companies in the same industry, dividend yields of Open Text are expected to be higher than for 98% of all competitors (a Dividend Yield rank of 98). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 98, is a buy recommendation based on Open Text's stock price compared with the company's operational size and dividend yields. Since all value metrics are above the industry average, there is no objection to investing in Open Text based on its detailed value metrics.
Growth Strategy: Open Text Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 71 (better than 71% compared with alternatives), Open Text shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Open Text. Sales Growth has a rank of 100 which means that currently professionals expect the company to grow more than 100% of its competitors. Stock Returns are also above average with a rank of 57. But Capital Growth has only a rank of 43, which means that currently professionals expect the company to grow its invested capital less than 57% of its competitors. Profit Growth is also low, with a rank of only 25, which means that, currently, professionals expect the company to grow its profits below average. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 71, is a buy recommendation for growth and momentum investors. This is a surprising picture, as the messages from the operating growth indicators of revenues, profits, and invested capital are mixed, while stock returns are above average. It may indicate new intellectual properties, such as brand improvement or a strong market position that shows in revenues but not in the capital. The low profit-growth rate may indicate an early phase where costs are still high, and revenues don't fully cover upfront investments or fixed costs. The positive investor outlook with a 57% peer outperformance is reaffirmed in this case which may be a good sign for an investment into a well-protected high-growth company. This fact needs to be confirmed by researching the company website and press. ...read more
Safety Strategy: Open Text Debt Financing Safety below-average
| SAFETY METRICS | July 27, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 40 |
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| REFINANCING | ||||||||
| REFINANCING | 3 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 82 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 41 |
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ANALYSIS: With an Obermatt Safety Rank of 41 (better than 41% compared with alternatives), the company Open Text has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of Open Text is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Open Text. Liquidity is at 82, meaning the company generates more profit to service its debt than 82% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 3, which means that the portion of the debt that is about to be refinanced is above average. It has more debt in the refinancing stage than 97% of its competitors. Leverage is also high at a rank of 40, which means that the company has an above-average debt-to-equity ratio. It has more debt than 60% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 41 (worse than 59% compared with alternatives), Open Text has a financing structure that is riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Open Text Top Financial Performance
| COMBINED PERFORMANCE | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 98 |
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| GROWTH | ||||||||
| GROWTH | 71 |
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| SAFETY | ||||||||
| SAFETY | 82 |
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| COMBINED | ||||||||
| COMBINED | 98 |
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ANALYSIS: With an Obermatt Combined Rank of 98 (better than 98% compared with investment alternatives), Open Text (Application Software, Canada) shares have much better financial characteristics than comparable stocks. Shares of Open Text are a good value (attractively priced) with a consolidated Value Rank of 98 (better than 98% of alternatives), show above-average growth (Growth Rank of 71) but are riskily financed (Safety Rank of 41), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 98, is a strong buy recommendation based on Open Text's financial characteristics. As the company Open Text's key financial metrics exhibit excellent performance in two areas, such as good value (Obermatt Value Rank of 98) and above-average growth (Obermatt Growth Rank of 71), it could be argued that the risk-taking in financing (Obermatt Safety Rank of only 41) indicates that the company is optimistic about the future and sees debt as an opportunity to boost returns. More debt means more shareholder returns if everything goes well. However, higher debt burdens are risky when interest rates rise or the business deteriorates in a crisis. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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