Could This Undervalued AI Company Be Canada’s Next Big Thing?

Open Text (TSX:OTEX) stock could be the next tech stock to surge from its use of artificial intelligence, making it a top cybersecurity investment.

| More on:
Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization

Image source: Getty Images

There are many Canadian companies that I would consider could be the next big thing, yet have nothing to do with how long they’ve been on the market. Look at tech stocks that have been around for decades, only to suddenly climb during the tech stock crazy of 2020 and 2021.

This includes artificial intelligence (AI) company Open Text (TSX:OTEX), a stock that’s been around for decades but has been expanding ever since. It now uses AI for data storage and cybersecurity detection. And yet it remains undervalued in several ways.

Let’s look at why and whether now is the time to buy Open Text stock.

Some history

Open Text stock hasn’t always been a major data storage provider. It started out in Waterloo, Ont. where it helped digitize the Oxford dictionary. Since then, however, it’s expanded to provide cloud storage to companies as large as Microsoft and Alphabet. It made several large partnerships and deals over the last few years that have proven quite lucrative. However, these days, it’s in the delivery phase.

To deliver all the promised cloud storage and data security, Open Text stock has been acquiring software businesses to expand its operations. And clearly, it’s been working. Open Text stock continues to beat earnings report after earnings report in terms of estimates. It remains a low-risk option for those wanting to get into tech stocks but who want the historical growth seen in the past.

Present performance

During its most recent earnings report, Open Text stock reported yet another record quarter. It was the ninth consecutive quarter of organic growth in cloud revenue as well as organic growth in annual recurring revenue (ARR). It also reported it’s ahead of schedule in terms of its Micro Focus acquisition.

Total revenue came in at $1.24 billion for the quarter, up 41.1% year over year, with cloud revenue at $435 million, and ARR at $1.01 billion, up 37.7% year over year.

This is only expected to grow further, as Open Text stock continues its move towards expanding the business in the cybersecurity space. The company expects continued success, with perhaps even more record earnings in the future.

Only growing from here

Open Text stock remains a strong choice for those seeking some value for their investment. In terms of this company, its expansion into cybersecurity, and using AI to achieve this, only opens the door for more growth.

Open Text stock now offers a 2.37% dividend yield and trades at 2.8 times book value as of writing. Shares are now up 11.5% in the last year, after falling dramatically back in the summer. So, I would certainly consider picking up the stock before it climbs further, based on the latest earnings results.

All in all, Open Text stock already looks like a strong company that’s only getting stronger. While other investors might be looking at e-commerce, cybersecurity offers a huge amount of growth in every sector — sectors where this company already has a foot in the door.

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Tech Stocks

grow dividends
Tech Stocks

2 Top Growth Stocks in Canada for October 2023

After a rough end to September, here are two discounted growth stocks to load up on in October.

Read more »

tsx today
Tech Stocks

TSX Today: What to Watch for in Stocks on Monday, October 2

Despite firmness in crude oil, continued big losses in gold and silver prices could pressure the main TSX index at…

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

TFSA Investors: 2 U.S. Tech Stocks to Buy and Hold Forever

U.S. stocks such as CrowdStrike and Datadog have the potential to outpace the broader markets and derive inflation-beating returns.

Read more »

Tech Stocks

3 Top Tech Stocks That Could Help Make You Rich by Retirement

Are you looking for tech stocks that could help make you rich by retirement? Here are three top picks!

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Tech Stocks

Pet Valu Stock vs. Chewy: Better Buy for the Long Run?

Chewy and Pet Valu are positioned to deliver outsized gains to shareholders. But which pet stock a better buy today?

Read more »

Businessman holding AI cloud
Tech Stocks

2 Artificial Intelligence-Powered Growth Stocks to Buy Right Now

Canadian investors should strongly consider Alphabet (NASDAQ:GOOGL) and another AI stock ahead of the next AI-driven tech boom.

Read more »

A colourful firework display
Tech Stocks

Nuvei Stock is on Fire This Year: Is it a Good Buy Today?

Nuvei stock (TSX:NVEI) is down about 85% since pandemic highs, falling 39% after earnings. So, what now?

Read more »

A bull outlined against a field
Tech Stocks

Prediction: These 2 Stocks Could Skyrocket in the Next Bull Market

Are you looking for stocks that could skyrocket in the next bull market? Here are two top picks!

Read more »