Does Open Text Offer Real Value After Recent Acquisition Push and 15% Share Price Dip?
Ever wondered if Open Text could be a hidden gem, or if the price tag is too steep right now? You are not alone, as many investors are taking a closer look at the company’s real value and future potential.
Open Text’s stock is up 17.5% year-to-date and has climbed 19.3% over the past year, despite dipping 15.2% in the last month. That mix of returns points to shifting sentiment and fresh possibilities.
Recent headlines have highlighted Open Text’s ongoing strategic acquisitions, including its expanded push into cloud services and cybersecurity. These moves have drawn attention from both analysts and larger peers. These bold steps are giving investors new reasons to reassess the company’s risk profile and growth outlook.
Looking at our checks, Open Text impresses with a valuation score of 6 out of 6, suggesting it screens as undervalued across every major metric. We will break down those valuation methods next, plus share an even smarter way to spot companies that are truly worth your attention.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by forecasting its future cash flows and discounting them back to today’s dollars. This approach is popular among investors because it focuses on the actual money a business is expected to generate, rather than just profits or sales.
For Open Text, the latest twelve months of Free Cash Flow stood at $913 Million. Analysts outline growth to roughly $1.01 Billion by June 2027, with longer-term projections (extrapolated by Simply Wall St) reaching $1.55 Billion a decade into the future. These estimates demonstrate sustained growth in cash generation over time.
Based on this model, the DCF calculation produces an intrinsic value of $67.73 per share. Currently, Open Text’s stock trades at a discount of 51.0% to this estimated fair value. According to this methodology, the shares may be significantly undervalued.
The takeaway, based on forward-looking cash flows and today’s share price, is clear: Open Text appears to offer strong value relative to its discounted cash flow projections.
The Price-to-Earnings (PE) ratio is a widely used metric for valuing profitable companies, as it reveals how much investors are willing to pay for each dollar of current earnings. For companies like Open Text, with stable profits, the PE ratio is particularly helpful in assessing how the market values its earnings potential versus other opportunities.
What constitutes a “normal” or “fair” PE ratio depends on several factors, including expected growth in profits and perceived risks. Companies expected to grow faster or with fewer risks typically command higher PE multiples. Those with slower growth or higher risks tend to trade at lower multiples.
Open Text currently trades at a PE ratio of 16.5x. For context, its industry peers average 33.8x, and the broader software industry sits at 29.2x. While this might suggest Open Text is undervalued compared to others, it is important to look deeper than simple averages.
This is where the proprietary “Fair Ratio” from Simply Wall St comes into play. The Fair Ratio, which stands at 34.7x for Open Text, factors in growth forecasts, risks, profit margins, market cap, and the company’s precise industry context. Unlike blunt peer or industry benchmarks, the Fair Ratio reflects a more tailored view of what Open Text’s PE should reasonably be, based on fundamentals and outlook.
With Open Text trading at 16.5x compared to a Fair Ratio of 34.7x, the stock currently appears significantly undervalued according to this model.
Earlier, we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple yet powerful tool that lets you express your own story for a company by combining your expectations for its future revenue, margins, and growth with your personal fair value estimate, all in one place. Narratives work by linking the company’s unique story to your financial forecast, creating a bridge from the “why” to the “what” and finally the “how much” in valuation terms.
Available directly on Simply Wall St’s Community page and used by millions of investors, Narratives make it easy for anyone to visualize how their assumptions and analysis stack up against the current market price. They also help answer the critical question of when to buy or sell. As new information comes in, such as earnings results or major headlines, your Narrative updates automatically and always reflects the latest data and perspectives.
For example, some investors’ Narratives for Open Text incorporate optimism about AI-powered growth and margin expansion, resulting in fair values as high as $48.00. Others take a more cautious view based on legacy transitions and execution risks, setting fair values as low as $31.00. By exploring different Narratives, you can see a spectrum of logical, data-driven viewpoints and decide how your own expectations compare.
NasdaqGS:OTEX Community Fair Values as at Nov 2025
This 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.
