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Why Open Text (OTEX) Hit An All-Time High Today

NEW YORK (TheStreet) -- Open Text  (OTEX) hit an all-time high of $104.21 on Friday after the company announced second-quarter earnings that beat estimates. 

The Canadian software company reported revenue of $363.5 million, up 3% year-over-year and above the consensus estimate of $352.5 million. Excluding items, the company earned $1.58 per share, beating estimates of $1.50 for the quarter.

Open Text also acquired GXS Group, a company that provides cloud integration services among businesses, for $1.17 billion in a deal announced in November. The deal became complete about one week ago.

The company also said it would split its stock 2-for-1.

RBC Capital raised its target price on the stock to $120 from $110. "OpenText went beyond most investors' expectations, delivering a healthy quarter, and calling for faster-than-expected synergies on the GXS acquisition," the report notes.

TheStreet Ratings team rates OPEN TEXT CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate OPEN TEXT CORP (OTEX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, solid stock price performance, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 57.6% when compared to the same quarter one year prior, rising from $19.43 million to $30.63 million.
  • Powered by its strong earnings growth of 57.57% and other important driving factors, this stock has surged by 56.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OTEX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $79.92 million or 29.40% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.30%.
  • The gross profit margin for OPEN TEXT CORP is currently very high, coming in at 73.83%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, OTEX's net profit margin of 9.44% significantly trails the industry average.
  • OPEN TEXT CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, OPEN TEXT CORP increased its bottom line by earning $2.52 versus $2.14 in the prior year.
  • You can view the full analysis from the report here: OTEX Ratings Report

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