1 Tech Stock Jumping 8% After Earnings and Acquisitions Boost

Shares of tech stock Open Text (TSX:OTEX)(NASADAQ:OTEX) continue to jump on the TSX today after two strong announcements: earnings and…

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Shares of tech stock Open Text (TSX:OTEX)(NASADAQ:OTEX) continue to jump on the TSX today after two strong announcements: earnings and a major acquisition. But what does that mean for investors looking to invest today?

What happened

Open Text stock climbed 8% during the last month on the back of strong earnings and a major acquisition. First, let’s take at the earnings report the company posted, which beat analyst estimates.

The tech stock had estimates of $0.93 earnings per share predicted by analysts. Instead, it posted EPS of $1.01, an earnings surprise of almost 9%. The company saw an increase in organic growth through its “cloud-first strategy” and investments. Open Text stock increased its GAAP-based net income by 27.6% year over year. The tech stock also announced it would continue its share repurchase program, as well as its dividend.

Furthermore, Open Text stock announced on Monday, November 8, it signed a deal to buy U.S. cybersecurity firm Zix. The company focuses on cloud email security and threat protection for small- and medium-sized business. The deal is valued at US$860 million, including debt. This alone saw shares climb as well.

So what

Open Text stock is a tech stock you want in your portfolio. It’s been around for decades, rolling with the internet punches. That includes in a day and age where cybersecurity is a necessity for businesses. The pandemic sent everything online, and Open Text stock benefitted from that shift.

The tech stock also already knew how to grow both organically and through a slew of acquisitions. It’s been doing that for decades as well. But it’s made several key partnerships over the last few years with major tech companies. Here, it provides its cloud services that all but guarantee cybersecurity defenses.

This all means that in an age where remote work is here to stay, Open Text stock is a strong investment for any portfolio.

Now what

So shares in the tech stock are up 8% in the last month, but does that mean it’s a deal? Honestly, on the surface, it doesn’t seem that way. It trades at a P/E ratio of 41.75 and an EV/EBITDA of 15.33. Not bad, not great either.

However, Motley Fool investors should always be thinking long-term. In the case of Open Text stock, you actually have data to look at. The company maintains its strong, secure growth pattern of acquisitions and partnerships. That’s led to 14% in returns year to date and 345% in the last decade.

Plus, you won’t see hardly any tech stock offering a dividend yield. Open Text offers a 1.7% yield as of writing. While that’s not the highest, it shows how strong the company is. Whereas other tech stocks need to reinvest that cash, Open Text can afford to share the wealth!

Bottom line

Open Text is a strong long-term investment for any Motley Fool portfolio. You can hold onto the tech stock and likely see even more strong returns in the decades to come via its secure acquisitions and growth strategy through partnerships. As cybersecurity grows, Open Text will only continue to see stellar recurring revenue. So now, you can latch on to this stock for more secure growth in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends OPEN TEXT CORP.

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