Value
8.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.8 |
| P/S | 9.6 |
| EV/EBITDA | 7.7 |
| Fwd P/E | 10.0 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 5.1x
- ▸PEG: 0.05
- ▸Attractively valued
OTEX · Why this verdict
Why Open Text (OTEX) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score6.1/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward P/E of 4.9x and PEG of 0.05, Open Text's valuation is exceptionally low relative to its earnings power, supported by 162% free cash flow conversion relative to net income. Valuation breakdown | Free cash flow conversion remains above 100% and the forward P/E expands toward 8x over 12 months as the market re-rates the stock. | →Stable |
| CounterThe low valuation may reflect persistent concern about slowing revenue growth and high leverage at a debt-to-equity ratio of 1.6, creating a value trap rather than a re-rating opportunity. | ||
Open Text beat consensus earnings estimates in 3 of the last 4 quarters, with the most recent three beats averaging approximately 8.7% above estimates, signaling consistent execution. Earnings | The company continues to beat consensus estimates in at least 3 of the next 4 quarters, and analyst estimates trend upward. | →Stable |
| CounterThe one quarter that missed came in 56% below estimates, suggesting earnings remain volatile and one negative quarter could reset the narrative sharply. | ||
A Piotroski F-Score of 7 out of 9 indicates improving financial health across profitability, leverage, and operating efficiency dimensions. Quality breakdown | The Piotroski F-Score remains at 7 or higher over the next four reporting periods as margins and balance sheet metrics hold. | →Stable |
| CounterA debt-to-equity ratio of 1.6 and Rule of 40 score of only 18 suggest the business is not growing fast enough to justify its leverage, limiting quality upside. | ||
The stock is trading below its 200-day moving average with the moving average sloping down at 3.2% over 30 days, indicating a confirmed downtrend that limits near-term upside. Momentum breakdown | Price rises above the 200-day moving average and the 30-day slope turns positive within 12 months, confirming a technical recovery. | →Stable |
| CounterRising on-balance volume despite the downtrend could be a false signal; death cross patterns in software stocks have historically preceded further declines of 15-20%. | ||
At a forward P/E of 4.9x and PEG of 0.05, Open Text's valuation is exceptionally low relative to its earnings power, supported by 162% free cash flow conversion relative to net income.
→StableValuation breakdown
- Expectation
- Free cash flow conversion remains above 100% and the forward P/E expands toward 8x over 12 months as the market re-rates the stock.
CounterThe low valuation may reflect persistent concern about slowing revenue growth and high leverage at a debt-to-equity ratio of 1.6, creating a value trap rather than a re-rating opportunity.
Open Text beat consensus earnings estimates in 3 of the last 4 quarters, with the most recent three beats averaging approximately 8.7% above estimates, signaling consistent execution.
→StableEarnings
- Expectation
- The company continues to beat consensus estimates in at least 3 of the next 4 quarters, and analyst estimates trend upward.
CounterThe one quarter that missed came in 56% below estimates, suggesting earnings remain volatile and one negative quarter could reset the narrative sharply.
A Piotroski F-Score of 7 out of 9 indicates improving financial health across profitability, leverage, and operating efficiency dimensions.
→StableQuality breakdown
- Expectation
- The Piotroski F-Score remains at 7 or higher over the next four reporting periods as margins and balance sheet metrics hold.
CounterA debt-to-equity ratio of 1.6 and Rule of 40 score of only 18 suggest the business is not growing fast enough to justify its leverage, limiting quality upside.
The stock is trading below its 200-day moving average with the moving average sloping down at 3.2% over 30 days, indicating a confirmed downtrend that limits near-term upside.
→StableMomentum breakdown
- Expectation
- Price rises above the 200-day moving average and the 30-day slope turns positive within 12 months, confirming a technical recovery.
CounterRising on-balance volume despite the downtrend could be a false signal; death cross patterns in software stocks have historically preceded further declines of 15-20%.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Open Text trades at a forward price-to-earnings ratio of 4.9x with a PEG of 0.05, making it attractively valued relative to its earnings beat history and 162% free-cash-flow conversion rate, but a death-cross technical pattern and high implied volatility of 77% keep near-term risk elevated.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.3 |
| ROA | 3.5 |
| Gross margin | 10.0 |
| Op margin | 8.6 |
| Net margin | 5.0 |
| Current ratio | 3.8 |
| FCF quality | 10.0 |
| Moat | 5.8 |
| Rule of 40 | 3.0 |
| Piotroski F | 7.8 |
- ▸Excellent cash conversion: 162% FCF/NI
- ▸Rule of 40: 18 (fail)
- ▸Strong Piotroski F-Score: 7/9
Growth
6.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
| EPS growth | 10.0 |
Momentum
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 0.6 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -4.5%/30d — confirmed downtrend
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.3 |
| erm sentiment | 6.0 |
- ▸Analyst upside: 26%
Insider
5.0/10data confidence 50%Peer rank
3.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.8 |
| quality rank | 5.8 |
| growth rank | 1.0 |
- ▸Attractive P/E vs peers
Technical
2.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.8 |
| support resistance | 2.3 |
| 52w position | 1.9 |
Risk (lower is worse)
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.8 |
| days to cover | 7.2 |
| volatility | 3.6 |
| put call | 3.3 |
| implied vol | 2.8 |
| beta | 6.8 |
| debt equity | 3.8 |
- ▸High IV: 63%
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 7.9 |
| dividend safety | 6.5 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 477.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position. | News modifier +1 (SELL_IF_HOLDING → HOLD_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_SELL|L3:NEWS_MOD=+1Passed (6)
- MOMENTUM:6.1>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.7<1.5@spot
Warning (2)
- DEATH_CROSS:momentum=6.1>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.67
Upside
+9.5%
Downside
14.2%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 60
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Drawdown -41% (>40% off 52w high)
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.4 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 8.7) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.7<1.5@spot) reinforce the read. Current asymmetry R:R is 0.67 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 8.7, Catalyst at 7.2, and Growth at 6.5; the weakest are Technical at 2.0, Peer rank at 3.9, and Risk (lower is worse) at 5.0. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 0.67 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Deep Value Fcf Conversion
Trip ifFree cash flow conversion falls below 80% for 2 consecutive quarters.
- P2Earnings Beat Streak
Trip ifEarnings per share misses consensus estimates in 2 or more of the next 4 quarters by greater than 10%.
- P3Piotroski Quality Signal
Trip ifPiotroski F-Score drops below 5 in any single reporting period.
- P4Technical Death Cross Risk
Trip ifPrice rises above the 200-day moving average and the 30-day moving average slope exceeds 0% for 4 consecutive weeks.