Open Text’s Cloud Kingdom: A SaaS Stock for the Long Haul?

Here’s why Open Text (TSX:OTEX) could indeed be a software-as-a-service stock that long-term investors may want to consider right now.

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Headquartered in Waterloo, Canada, Open Text (TSX:OTEX) is an organization involved in marketing, development, designing, and selling of management solutions and software. The company has been operational since 1991, and its clients mainly comprise direct consumers, small- and medium-sized companies, mid-market firms, and other firms. 

This software provider has strategic partnerships with tech giants like Alphabet’s Google Cloud, Microsoft, Amazon’s AWS, and others. Furthermore, it provides services in major countries around the world like the U.S., U.K., Middle East, Germany, and more. 

Thus, when it comes to software-as-a-service (SaaS) stocks, Open Text is a company that draws the attention of almost all investors. Here are some potential reasons why this stock can be great for the long haul. 

Open Text reports solid earnings in the third quarter of 2023

In Q3 2023, the total revenue of this Canadian software company reached US1.24 billion, indicating year-over-year growth of more than 41%. Its annual recurring revenues were up by 37.7%, coming in at US$1.01 billion. 

The quarterly enterprise cloud bookings reached US$108 million, while the company’s trailing 12-month (TTM) operating cash flows and TTM free cash flows coming in at US$916 million and US$778 million, respectively. Furthermore, the company’s adjusted earnings before interest, taxes, depreciation, and amortization figures were US$365 million and GAAP-based (generally accepted accounting principles) diluted earnings per share was US$0.21. 

As per Open Text’s chief financial officer Madhu Ranganathan, these figures show the organization’s continued momentum in the information management market. It also indicates that the company is on track to achieving its growth and acquisition targets. 

Launch of ValueEdge23

In late March, Open Text announced the launch of ValueEdge23. It is a state-of-the-art value stream management and DevOps platform, which, thanks to the latest update, enables chief technology officers to increase the speed to value during an application development process. 

This new feature will increase the ease with which companies can automate their entire digital value chain. Thus, they can release their applications in the market at a faster pace, providing customers with a better user experience and gaining an edge over the competition. 

Release of Cloud Editions (CE) 23.2

Additionally, in late April, Open Text has announced the release of its Cloud Editions (CE) 23.2. It is a cloud-based operations platform featuring more than 75,000 new innovations. This will help the clients speed up their digital transformation and enable them to ramp up their productivity and profitability. Furthermore, this update also enhances security and streamlines the end-user experience. 

Bottom line

The technological innovations and strong financial performance of Open Text have set its growth trajectory sky high. These are among the many reasons this SaaS stock is an excellent asset to hold for the long run. 

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Chris MacDonald has positions in The Motley Fool recommends Alphabet,, and Microsoft. The Motley Fool has a disclosure policy.

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