Investors come in all different shapes and sizes, typically holding different goals with respect to what they want out of their portfolios. Dividend investors focus on income, and there are certainly plenty of investors who have benefited from growth-oriented mandates, given the run growth stocks have been on of late. 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 tech stock long-term growth investors may want to consider right 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 got its start as an information management software solutions company, with a focus on government contracts. The company has expanded its business to include a range of global companies, SMBs, and consumers in its portfolio. As cloud network growth continues, the IT operations management software, which operates on the cloud, should continue to outperform. For investors bullish on the future of cloud technologies, investing at the source with companies that provide such services has been a proven way to grow one’s wealth over the long term.
Improving earnings
Of course, not all companies will ultimately dominate this space, and Open Text doesn’t operate in a vacuum. This is a competitive sector (given its high margins), so investors will want to keep a close eye on earnings moving forward to determine whether OTEX stock is worth buying at a given point in time.
As of late, the company’s earnings have been lacklustre, with quarterly revenue growth sitting around 8.6%. For most companies, that would be great. However, for a cloud software player like Open Text, it’s clear the market has wanted more.
I think that as spending continues to pick up over time, Open Text’s ability to ramp up its growth should portend well for investors over time. But for now, investors certainly appear to be taking a cautious approach to this stock, given its fundamentals.
Open Text stock is cheap
On that note, it’s worth pointing out that Open Text stock is currently trading at a forward price-earnings multiple of just 9.5 times. That’s dirt cheap in most sectors, let alone the cloud software space. As far as bargain picks in otherwise high-growth sectors are concerned, this stock certainly looks like it’s been put in the penalty box (or at least the discount bin) for its relative lack of growth.
Again, if the company can pick up its growth rate and continue to deliver new and exciting products that provide any sort of enthusiasm from the market, this is a stock that appears well-positioned to take off. A number of things have to go right – and therein lies the risk. But I think the risk/reward outlook for this company is certainly tilted to the upside right now.
