Latest news with #OpenTextCorporation
Yahoo
04-05-2025
- Business
- Yahoo
Open Text Corporation (OTEX): Among Overlooked Tech Stocks to Buy Now
We recently published a list of . In this article, we are going to take a look at where Open Text Corporation (NASDAQ:OTEX) stands against other overlooked tech stocks to buy now. After overcoming major macroeconomic challenges, the IT sector has started 2025 with fresh vigor. The tech sector is now ready for a resurgence after a period of instability characterized by high inflation, rising interest rates, and worldwide unpredictability. The sector is expected to be 'healthy' or 'very healthy' in 2025, according to 62% of tech executives polled by Deloitte. Global IT spending is expected to increase by 9.3%, driven mostly by double-digit growth in software and data center investments. As companies move AI initiatives from pilot projects to full-scale production deployments, analysts anticipate that generative AI, cybersecurity, and cloud services will continue to be important growth drivers. The rate of layoffs dropped significantly in 2024, indicating growing stability. But new difficulties have surfaced, especially in relation to geopolitical tensions and regulatory barriers. The world economy is already feeling the effects of President Trump's expansive tariff plans, which include additional charges on major tech manufacturing countries like Taiwan, India, and Vietnam that range from 26% to 49%. Although imports of semiconductors, which are essential for the development of AI, have been temporarily exempted, tech companies that rely on international supply chains face new risks as a result of the unstable trade policy climate. Meanwhile, generative AI is proving to be a double-edged sword. While it is projected to contribute 21% to U.S. GDP by 2030, as reported by the World Economic Forum, there are growing concerns about the technology displacing millions of jobs, particularly administrative roles. As the World Economic Forum highlights, the solution lies not in halting AI innovation but fostering 'Authentic Intelligence'—an approach emphasizing the collaboration of human critical thinking with AI's capabilities to ensure inclusive economic growth. Additionally, cybersecurity has become a significant priority on the strategic agenda. As the use of AI increases, so does the attack surface available to hackers. By 2028, it's expected that global spending on cybersecurity will exceed $200 billion, as businesses emphasize bolstering their defenses. However, only 24% of existing gen AI projects are thought to be sufficiently secure, indicating that trust is still a major obstacle to the widespread use of AI. In summary, despite the fact that 2025 holds great promise for the IT industry due to advancements in generative AI, cloud migration, and robust IT investment, businesses still have to deal with a complex web of ethical, geopolitical, and legal issues. Successful companies will strike a balance between daring technological innovation, careful risk management, strategic supply chain diversity, and a dedication to upholding stakeholder and customer confidence. Against this dynamic backdrop, let's look at 10 Overlooked Tech Stocks to Buy Now, which are not only ready to capitalize on upcoming opportunities but may also provide attractive upside potential for investors seeking beyond the conventional mega-cap giants. To find overlooked tech stocks, we started by looking for companies with a market capitalization greater than $5 billion, ensuring a concentration on financially strong, large-cap enterprises. We chose stocks from this category that had a price-to-earnings (P/E) ratio of less than 15, using the P/E ratio as a conventional valuation indicator to highlight relatively affordable earnings-driven stocks. We then evaluated these firms based on hedge fund sentiment, utilizing data from Insider Monkey's fourth quarter 2024 report. Finally, we chose the ten companies with the least number of hedge fund investors to represent our list of Overlooked Tech Stocks to Buy Now. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here). A close-up of a cyber security hardware device used for protection. P/E Ratio: 6.4 Hedge Fund Holders: 14 Open Text Corporation (NASDAQ:OTEX) is a major provider of information management and cybersecurity solutions to global enterprise clients. Headquartered in Waterloo, Canada, the company's diverse portfolio includes content management, AI-powered analytics, cybersecurity, cloud services, and supply chain automation, with over 120,000 customers worldwide. Open Text Corporation (NASDAQ:OTEX) reported $1.33 billion in revenue and $501.5 million in adjusted EBITDA in fiscal Q2 2025, for a margin of 37.6%. Free cash flow totaled $307 million, and the company completed the quarter with $1.12 billion of cash. The company returned $258 million to shareholders through share repurchases and increased its fiscal 2025 share buyback authorization by $150 million, bringing it to $450 million. Cloud revenues increased 2.7% year-over-year, driven by a record $250 million in new cloud contract bookings. Open Text Corporation (NASDAQ:OTEX) expanded its cybersecurity solution by launching Core Threat Detection and Response on February 20, 2025. The new AI-powered technology, which integrates with Microsoft Azure and Security Copilot, improves threat detection across hybrid cloud settings. The Cybersecurity Cloud now serves more than 7,500 enterprise clients, establishing Open Text Corporation (NASDAQ:OTEX) as a market leader in next-generation security solutions. Management confirmed its fiscal 2025 free cash flow projection of $600 to $650 million, while marginally decreasing sales expectations to $5.175 billion to $5.27 billion. Importantly, Open Text Corporation (NASDAQ:OTEX) anticipates a return to total revenue growth in Q4, led by cloud, security, and AI projects based on its Titanium X platform. With strong momentum in its cloud and cybersecurity businesses, aggressive capital returns, and improved operational efficiency, Open Text Corporation (NASDAQ:OTEX) is developing as an overlooked tech stock with the ability to deliver long-term shareholder value. Overall, OTEX ranks 2nd on our list of overlooked tech stocks to buy now. While we acknowledge the potential of OTEX, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than OTEX but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
Yahoo
02-05-2025
- Business
- Yahoo
Is Open Text Corporation (NASDAQ:OTEX) Potentially Undervalued?
Open Text Corporation (NASDAQ:OTEX), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Let's examine Open Text's valuation and outlook in more detail to determine if there's still a bargain opportunity. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Great news for investors – Open Text is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Open Text's ratio of 10.12x is below its peer average of 32.07x, which indicates the stock is trading at a lower price compared to the Software industry. What's more interesting is that, Open Text's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market. See our latest analysis for Open Text Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. However, with a relatively muted profit growth of 6.8% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for Open Text, at least in the short term. Are you a shareholder? Even though growth is relatively muted, since OTEX is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple. Are you a potential investor? If you've been keeping an eye on OTEX for a while, now might be the time to enter the stock. Its future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy OTEX. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, Open Text has 2 warning signs (and 1 which is potentially serious) we think you should know about. If you are no longer interested in Open Text, you can use our free platform to see our list of over 50 other stocks with a high growth potential. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Forbes
28-03-2025
- Business
- Forbes
OpenText - A Rare Deep Value Software Stock With Growth Potential
By Praveen Chawla OpenText Corporation, a Canada based enterprise information management software company, has faced significant challenges in recent years following a large acquisition. The stock has experienced a substantial decline, with a 41% drop over the past three years and a 33% decrease in the last year alone, currently trading at $26.09 per share. Despite this, it offers an attractive forward dividend yield of 4.05%, supported by an annual dividend payout ratio of $0.26. OpenText's valuation is notably low, with a forward price-to-earnings (P/E) ratio of 6.38, suggesting potential undervaluation compared to industry peers. The company's financials show revenue decline due to divestments, but strong adjusted EBITDA margins remain. OpenText is focusing on growth areas like cloud computing and artificial intelligence (AI), with initiatives such as the Titanium X platform launch expected to drive AI-related revenue. However, high debt levels and slow organic growth posed challenges. The company has now addressed the debt issue through a divestiture and has made good progress in reducing debt. OpenText is a global leader in information management, operating in a $200 billion total addressable market. The company is active in six key markets: content management, IT operations management, application development and modernization, business network, cybersecurity, and AI analytics. OpenText is approaching $6 billion in revenue for fiscal 2026, with cloud bookings growth exceeding 15% annually and an adjusted EBITDA of 30%. Analysts anticipate earnings growth and increased free cash flow, but concerns about underperformance and investor confidence remain. Overall, OpenText presents a mixed picture for investors, balancing potential undervaluation and growth prospects against significant business challenges. Open Text Corp 12 Month Price Targets Chart OpenText offers a comprehensive suite of enterprise software products that span various aspects of information management and digital business processes. At the core of their offerings is the Enterprise Content Management (ECM) suite, which includes the Content Suite Platform, Extended ECM, and Documentum. For business-to-business integration, OpenText provides the Trading Grid as part of its Business Network solutions. The company also offers Customer Experience Management tools and Digital Process Automation solutions like AppWorks. In the realm of legal technology, OpenText's Discovery suite, featuring Axcelerate, supports eDiscovery and investigations. The company has significantly bolstered its security offerings with products such as EnCase Forensic Security Suite, Carbonite, Webroot, NetIQ, ArcSight, Voltage, and Fortify. For organizations looking to leverage artificial intelligence and analytics, OpenText provides the Magellan Product Suite. Additional key products include information management tools like Archive Center and RightFax, as well as web content management solutions. This diverse product portfolio positions OpenText as a one-stop shop for enterprises seeking comprehensive information management and digital transformation solutions. Over its history OpenText has been an highly acquisitive company to build out its software stack. The acquisitions started in 2003 with IXOS Software AG; some recent acquisitions included Micro Focus in 2023 and Application Modernization and Connectivity (AMC) business in 2024. These acquisitions highlight OpenText's significant acquisitions and a recent major divestment, showcasing the company's strategic evolution in the enterprise information management space. It also demonstrates the company's considerable experience in integrating acqusitions. OpenText's $5.8 billion acquisition of UK based MicroFocus in 2023 was driven by a multifaceted strategy aimed at significantly expanding its market presence and enhancing its product portfolio. This move expanded OpenText's total addressable market (TAM) to $170 billion and added approximately $2.7 billion in annual revenue, making it one of the world's largest software and cloud businesses. The acquisition brought valuable software solutions in areas such as identity access, security, IT operations management, and networking, complementing OpenText's existing offerings and accelerating its digital transformation capabilities through enhanced cloud and AI technologies. OpenText also /gained access to MicroFocus's prestigious customer base, strengthening its global reach and cybersecurity offerings. The company projected annual cost savings of $400 million through operational synergies and expected the acquisition to immediately boost its adjusted EBITDA and free cash flow. Ultimately, this strategic move positioned OpenText as a more comprehensive and competitive player in the information management and enterprise software space, while achieving significant operational and financial synergies. Company Strategy The company's future business strategy focuses more on organic growth, primarily driven by cloud services. Cloud revenue is projected to comprise 40% of total revenue, with customer support at 40% and license/professional services at 20%. OpenText continues to offer on-premises options for customers while investing heavily in cloud development. This dual approach allows the company to cater to a wide range of customer needs. Open Text Operating Revenue by Business Segment In early 2023, OpenText acquired Micro Focus for approximately $6 billion. As part of its strategic realignment, the company has divested the Mainframe, Application Modernization and Connectivity (AMC) business for $2.275 billion. Following this divestiture, OpenText will retain IT operations management, application development and modernization, cybersecurity, and AI analytics from Micro Focus. This strategic move is designed to optimize OpenText's portfolio and focus on high-growth areas. Artificial intelligence (AI) is seen as a significant growth opportunity for OpenText, driving cloud bookings growth. The company has launched an AI product called Aviator, which is available across all business pillars. OpenText is leveraging its large installed base and existing customer relationships to drive AI adoption, positioning itself for further expansion in this area. Financially, OpenText plans to use the proceeds from the AMC divestiture to reduce debt, aiming to bring its net leverage ratio below 3x. Once leverage covenants allow, the company intends to implement a share buyback program. OpenText has increased its annual cloud bookings growth guidance to 25-30% and expects 7-9% revenue growth in fiscal 2026. This strategic financial management is designed to enhance shareholder value while supporting ongoing business growth. The near term Revenue and Operating Income trend appears to be encouraging, with double digit % growth over the last 3 years, and it appears that the company is coming out of a funk following a period of major acquisitions and divestment. Open Text Price Revenue and Operating Income Chart Guru Holdings of OpenText Ray Dalio's Bridgewater, Brandes Investment, Grantham, Greenblatt and Royce have holdings in Open Text. Most of the gurus are value investors while Ray Dalio (Trades, Portfolio) is more of a "macro" investor. Open Text Guru Trades Chart Jarislowsky, Fraser Ltd (JFL Global) is one of the largest institutional shareholders of OpenText Corporation. They own about 7.14% of the outstanding shares. JFL Global which is based in Montreal is a long term investor and emphasizes quality business's with sustainable competitive advantage. Mackenzie Financial Corporation a Toronto based deep value investor holds 2.07% of the outstanding stock. Conclusion OpenText is still in a period of transition after its transformative acquisition of Microfocus and divestment of AMC. It's basically now transitioning from being an acquirer towards an emphasis on organic growth focused on cloud and Software as a Service (Saas). OpenText's has a large TAM to aim for and a long runway for growth. It also has a very large and sticky legacy business which brings in reliable cash flows from lucrative and renewing customer support services. The company's FCF yield is nearly 10%. Open Text Cash and Debt Chart Given the deleveraging following the AMC divestment the company's balance sheet is now in better shape (with debt/equity of 1.58) and the company is poised to return cash to the company via stock buybacks. I expect the stock should offer steady growth in the years ahead. OpenText is a rare undervalued stock and an established dividend payer, a rarity in the software industry.
Yahoo
28-03-2025
- Business
- Yahoo
OpenText - A Rare Deep Value Software Stock
OpenText Corporation (NASDAQ: OTEX), (TSX:OTEX) a Canada based enterprise information management software company, has faced significant challenges in recent years following a large acqusition. The stock has experienced a substantial decline, with a 41% drop over the past three years and a 33% decrease in the last year alone, currently trading at $26.09 per share. Despite this, it offers an attractive forward dividend yield of 4.05%, supported by an annual dividend payout ratio of $0.26. OpenText's valuation is notably low, with a forward price-to-earnings (P/E) ratio of 6.38, suggesting potential undervaluation compared to industry peers. The company's financials show revenue decline due to divestments, but strong adjusted EBITDA margins remain. OpenText is focusing on growth areas like cloud computing and artificial intelligence (AI), with initiatives such as the Titanium X platform launch expected to drive AI-related revenue. However, high debt levels and slow organic growth posed challenges. The company has now addressed the debt issue through a divestiture and has made good progress in reducing debt. OpenText is a global leader in information management, operating in a $200 billion total addressable market. The company is active in six key markets: content management, IT operations management, application development and modernization, business network, cybersecurity, and AI analytics. OpenText is approaching $6 billion in revenue for fiscal 2026, with cloud bookings growth exceeding 15% annually and an adjusted EBITDA of 30%. Analysts anticipate earnings growth and increased free cash flow, but concerns about underperformance and investor confidence remain. Overall, OpenText presents a mixed picture for investors, balancing potential undervaluation and growth prospects against significant business challenges. OpenText offers a comprehensive suite of enterprise software products that span various aspects of information management and digital business processes. At the core of their offerings is the Enterprise Content Management (ECM) suite, which includes the Content Suite Platform, Extended ECM, and Documentum. For business-to-business integration, OpenText provides the Trading Grid as part of its Business Network solutions. The company also offers Customer Experience Management tools and Digital Process Automation solutions like AppWorks. In the realm of legal technology, OpenText's Discovery suite, featuring Axcelerate, supports eDiscovery and investigations. The company has significantly bolstered its security offerings with products such as EnCase Forensic Security Suite, Carbonite, Webroot, NetIQ, ArcSight, Voltage, and Fortify. For organizations looking to leverage artificial intelligence and analytics, OpenText provides the Magellan Product Suite. Additional key products include information management tools like Archive Center and RightFax, as well as web content management solutions. This diverse product portfolio positions OpenText as a one-stop shop for enterprises seeking comprehensive information management and digital transformation solutions. Over its history OpenText has been an highly acquisitive company to build out its software stack. Here's a table listing OpenText's key acquisitions and divestment, sorted by date: Date Type Company/Business Value Description 2003 Acquisition IXOS Software AG - Added content and email archiving capabilities 2004 Acquisition Artesia - Added digital asset management capabilities 2006 Acquisition Hummingbird Ltd. $489 million Expanded ECM offerings 2008 Acquisition Captaris Inc. $131 million Added document capture and fax solutions 2009 Acquisition Vignette Corporation $321 million Enhanced web content management and social media capabilities 2012 Acquisition EasyLink $232 million Expanded cloud-based offerings 2014 Acquisition GXS Inc. $1.06 billion Added B2B integration and cloud-based fax services 2014 Acquisition Actuate - Expanded analytics capabilities 2015 Acquisition Daegis $13.5 million Enhanced eDiscovery solutions 2016 Acquisition Dell EMC's Enterprise Content Division (including Documentum) $1.62 billion Strengthened position in Content Services 2017 Acquisition Covisint $103 million Integrated into OpenText Business Network 2017 Acquisition Guidance Software $240 million Enhanced digital investigation capabilities 2018 Acquisition Liaison Technologies $310 million Integrated into OpenText ALLOY Platform 2019 Acquisition Carbonite Inc. (including Webroot and Mozy) $1.45 billion Enhanced cyber resilience offerings 2020 Acquisition Xmedius $75 million Expanded secure information exchange capabilities 2021 Acquisition Zix Corp $860 million Strengthened cloud security offerings 2021 Acquisition Bricata - Added Network Detection & Response technology 2023 Acquisition Micro Focus $5.8 billion Added AI & Analytics, Application Delivery & Management, and IT Operations Management capabilities 2024 Divestment Application Modernization and Connectivity (AMC) business $2.275 billion Sold to Rocket Software to focus on Cloud and AI opportunities in Information Management The table above highlights OpenText's significant acquisitions and a recent major divestment, showcasing the company's strategic evolution in the enterprise information management space. It also demonstrates the company's considerable experience in integrating acqusitions. OpenText's $5.8 billion acquisition of UK based MicroFocus in 2023 was driven by a multifaceted strategy aimed at significantly expanding its market presence and enhancing its product portfolio. This move expanded OpenText's total addressable market (TAM) to $170 billion and added approximately $2.7 billion in annual revenue, making it one of the world's largest software and cloud businesses. The acquisition brought valuable software solutions in areas such as identity access, security, IT operations management, and networking, complementing OpenText's existing offerings and accelerating its digital transformation capabilities through enhanced cloud and AI technologies. OpenText also /gained access to MicroFocus's prestigious customer base, strengthening its global reach and cybersecurity offerings. The company projected annual cost savings of $400 million through operational synergies and expected the acquisition to immediately boost its adjusted EBITDA and free cash flow. Ultimately, this strategic move positioned OpenText as a more comprehensive and competitive player in the information management and enterprise software space, while achieving significant operational and financial synergies. The company's future business strategy focuses more on organic growth, primarily driven by cloud services. Cloud revenue is projected to comprise 40% of total revenue, with customer support at 40% and license/professional services at 20%. OpenText continues to offer on-premises options for customers while investing heavily in cloud development. This dual approach allows the company to cater to a wide range of customer needs. In early 2023, OpenText acquired Micro Focus for approximately $6 billion. As part of its strategic realignment, the company has divested the Mainframe, Application Modernization and Connectivity (AMC) business for $2.275 billion. Following this divestiture, OpenText will retain IT operations management, application development and modernization, cybersecurity, and AI analytics from Micro Focus. This strategic move is designed to optimize OpenText's portfolio and focus on high-growth areas. Artificial intelligence (AI) is seen as a significant growth opportunity for OpenText, driving cloud bookings growth. The company has launched an AI product called Aviator, which is available across all business pillars. OpenText is leveraging its large installed base and existing customer relationships to drive AI adoption, positioning itself for further expansion in this area. Financially, OpenText plans to use the proceeds from the AMC divestiture to reduce debt, aiming to bring its net leverage ratio below 3x. Once leverage covenants allow, the company intends to implement a share buyback program. OpenText has increased its annual cloud bookings growth guidance to 25-30% and expects 7-9% revenue growth in fiscal 2026. This strategic financial management is designed to enhance shareholder value while supporting ongoing business growth. The near term Revenue and Operating Income trend appears to be encouraging, with double digit % growth over the last 3 years, and it appears that the company is coming out of a funk following a period of major acquisitions and divestment. TSX:OTEX Data by GuruFocus Warning! GuruFocus has detected 4 Warning Signs with OTEX. The following Guru's hold OpenText stock in their portfolio. Brandes, Grantham, Greenblatt and Royce are value investors whie Ray Dalio (Trades, Portfolio) is more of a "macro" investor. Guru Portfolio Date Current Shares % of Shares outstanding % of Total Assets Managed Comment Brandes Investment Partners, LP (Trades, Portfolio) 2024-12-31 4,504,139 1.710 1.43% Add 29.17% Jeremy Grantham (Trades, Portfolio) 2024-12-31 1,297,772 0.490 0.12% Add 84.26% Ray Dalio (Trades, Portfolio) 2024-12-31 174,047 0.070 0.02% Add 361.34% Joel Greenblatt (Trades, Portfolio) 2024-12-31 48,059 0.020 0.01% Reduce -5.28% Chuck Royce (Trades, Portfolio) 2024-12-31 32,519 0.010 0.01% Reduce -69.24% Jarislowsky, Fraser Ltd (JFL Global) is one of the largest institutional shareholders of OpenText Corporation. They own about 7.14% of the outstanding shares. JFL Global which is based in Montreal is a long term investor and emphasizes quality business's with sustainable competitive advantage. Mackenzie Financial Corporation a Toronto based deep value investor holds 2.07% of the outstanding stock. OpenText is still in a period of transition after its transformative acquisition of Microfocus and divestment of AMC. It's basically now transitioning from being an acquirer towards an emphasis on organic growth focused on cloud and Software as a Service (Saas). OpenText's has a large TAM to aim for and a long runway for growth. It also has a very large and sticky legacy business which brings in reliable cash flows from lucrative and renewing customer support services. The company's FCF yield is nearly 10%. Given the deleveraging following the AMC divestment the company's balance sheet is now in better shape (with debt/equity of 1.58) and the company is poised to return cash to the company via stock buybacks. I expect the stock should offer steady growth in the years ahead. OpenText is a rare undervalued stock and an established dividend payer, a rarity in the software industry. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
18-03-2025
- Business
- Yahoo
Open Text Corporation (NASDAQ:OTEX) is largely controlled by institutional shareholders who own 75% of the company
Given the large stake in the stock by institutions, Open Text's stock price might be vulnerable to their trading decisions A total of 25 investors have a majority stake in the company with 50% ownership Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business A look at the shareholders of Open Text Corporation (NASDAQ:OTEX) can tell us which group is most powerful. The group holding the most number of shares in the company, around 75% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company. Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait. Let's delve deeper into each type of owner of Open Text, beginning with the chart below. Check out our latest analysis for Open Text Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index. Open Text already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Open Text's historic earnings and revenue below, but keep in mind there's always more to the story. Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Open Text. Our data shows that Jarislowsky, Fraser Limited is the largest shareholder with 7.1% of shares outstanding. With 4.0% and 3.5% of the shares outstanding respectively, The Vanguard Group, Inc. and Harris Associates L.P. are the second and third largest shareholders. Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder. While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future. The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO. I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions. Shareholders would probably be interested to learn that insiders own shares in Open Text Corporation. The insiders have a meaningful stake worth US$133m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling. The general public, who are usually individual investors, hold a 22% stake in Open Text. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run. While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Open Text (of which 1 makes us a bit uncomfortable!) you should know about. If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
