OTEX
Open Text Corporation
$23.47
Platform & Compounding FCF
70%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 55.8% above fair value
You pay
$23.47
Bear
$15.07
Fair
$15.07
Bull
$18.46
Bear
$15.07
-35.8%
3% stage 1 growth, 11% discount
Fair
$15.07
-35.8%
3% stage 1 growth, 11% discount
Bull
$18.46
-21.4%
4% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (3% base case)
Terminal Value % of EV
33%
Implied Market Multiple
18.4x
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 $31.20 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $15.07 per share.
Warnings
Wall Street's average price target is $31.20 (from 26 analysts). Our estimate is 69% below 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