3 Reasons to Buy Open Text Stocks Like There’s No Tomorrow

Investors come in different shapes and sizes, typically with different goals in terms of what they want from their portfolios. Dividend investors focus on yield, and there are certainly many investors who have benefited from growth-oriented mandates given the run that growth stocks have been on lately. However, one growth stock that has not participated in this rally in recent years has been OpenText Corporation (TSX:OTEX). And oddly enough, I think this is a top technology stock that long-term growth investors might want to consider now.

Here are three reasons why I think Open Text deserves a closer look from investors of all types.

A growth-oriented business model

Open Text started as an information management software solutions company, focusing on government contracts. The company has expanded its business to include a variety of global enterprises, small and medium enterprises and consumers in its portfolio. As the growth of cloud networking continues, IT operations management software that operates in the cloud is expected to continue to outperform. For investors optimistic about the future of cloud technologies, investing at the source with companies that provide these services has been a proven way to grow long-term wealth.

Improving earnings

Of course, not all companies will end up dominating this space, and Open Text does not operate in a vacuum. This is a competitive sector (given its high margins), so investors will want to keep an eye on future earnings to determine whether OTEX stock is worth buying at a given time.

The company’s earnings have been weak lately, with quarterly revenue growth hovering around 8.6%. For most companies, this would be great. However, for a cloud software player like Open Text, it’s clear the market wanted more.

I think that as spending continues to increase over time, Open Text’s ability to accelerate its growth should bode well for investors over time. But for now, investors certainly seem to be taking a cautious approach to this stock, given its fundamentals.

Open text stock is cheap

In this sense, it is worth noting that Open Text shares are currently trading at a forward price-earnings multiple of just 9.5 times. This is very cheap in most industries, let alone in the cloud software space. As far as bargains in high-growth sectors go, this stock certainly appears to have been placed in the penalty box (or at least the discount box) for its relative lack of growth.

Again, if the company can regain its growth rate and continue to provide new and exciting products that provide any kind of excitement to the market, this is a stock that looks well positioned to take off. There are a number of things that have to go well – and that is where the risk lies. But I think the risk/reward outlook for this company is certainly tilted to the upside at this point.