OTEX
Open Text Corporation
$23.27
Platform & Compounding FCF
70%
Two-stage FCF DCF
Moderate
·
Conviction
Undervalued
Trading 35.2% below fair value
You pay
$23.27
Bear
$19.27
Fair
$35.89
Bull
$52.86
Bear
$19.27
-17.2%
7% stage 1 growth, 11% discount
Fair
$35.89
+54.2%
12% stage 1 growth, 11% discount
Bull
$52.86
+127.2%
15% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (12% base case)
Terminal Value % of EV
40%
Implied Market Multiple
18.3x
Market is pricing in (growth)
7.8%
vs 11.5% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $29.75 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $35.89 per share.
Warnings
Wall Street's average price target is $29.75 (from 26 analysts). Our estimate is 28% above the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions