Yahoo Finance Could This Undervalued AI Company Be Canada’s Next Big Thing?
Written by Amy Legate-Wolfe at The Motley Fool Canada
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.
The post Could This Undervalued AI Company Be Canada’s Next Big Thing? appeared first on The Motley Fool Canada.
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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.
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