OTEX is trading at 8X forward earnings and roughly a 9% free cash flow yield. It has a trailing twelve-month buyback yield of 2.6%, a dividend yield of 3.5%, but analysts expect sales and earnings growth to decline in the next fiscal year. It is cheap, and has good margins and free cash flows, but if its growth continues to trend negative, these can deteriorate quickly, which is partially why analysts are downgrading the price. Analysts, also typically follow price momentum and this can create a negative feedback loop.
Technically, the stock has made a 'higher low' from its low in late 2022, and if the company surprises to the upside in any future earnings release, we could see a big jump in share price. OTEX has historically traded at a low P/E multiple relative to tech peers (10-year average forward P/E of 12.8X), and so a big jump in valuation would be surprising to us, but for a tech name with a yield and decent fundamentals, we think it looks interesting here as a long-term contrarian play, while not necessarily having the same upside potential as other really high-growth tech names like NVDA, CLS, etc.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in NVDA.