Intrinsic value of Open Text - OTEX

Previous Close

$32.71

  Intrinsic Value

$88.30

stock screener

  Rating & Target

str. buy

+170%

Previous close

$32.71

 
Intrinsic value

$88.30

 
Up/down potential

+170%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of OTEX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 8.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.60
  37.20
  33.98
  31.08
  28.47
  26.13
  24.01
  22.11
  20.40
  18.86
  17.47
  16.23
  15.10
  14.09
  13.18
  12.37
  11.63
  10.97
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
Revenue, $m
  2,291
  3,143
  4,211
  5,520
  7,092
  8,945
  11,093
  13,546
  16,310
  19,386
  22,773
  26,469
  30,467
  34,761
  39,344
  44,210
  49,351
  54,763
  60,442
  66,386
  72,593
  79,064
  85,803
  92,814
  100,103
  107,680
  115,553
  123,734
  132,238
  141,078
  150,272
Variable operating expenses, $m
 
  2,381
  3,074
  3,924
  4,943
  6,146
  7,539
  9,131
  10,924
  12,920
  15,118
  17,174
  19,769
  22,555
  25,529
  28,686
  32,022
  35,533
  39,218
  43,074
  47,102
  51,301
  55,673
  60,222
  64,952
  69,868
  74,977
  80,285
  85,803
  91,539
  97,504
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,062
  2,381
  3,074
  3,924
  4,943
  6,146
  7,539
  9,131
  10,924
  12,920
  15,118
  17,174
  19,769
  22,555
  25,529
  28,686
  32,022
  35,533
  39,218
  43,074
  47,102
  51,301
  55,673
  60,222
  64,952
  69,868
  74,977
  80,285
  85,803
  91,539
  97,504
Operating income, $m
  1,229
  762
  1,137
  1,597
  2,149
  2,799
  3,554
  4,415
  5,385
  6,466
  7,655
  9,295
  10,698
  12,206
  13,816
  15,524
  17,330
  19,230
  21,224
  23,311
  25,491
  27,763
  30,130
  32,591
  35,151
  37,812
  40,576
  43,449
  46,435
  49,539
  52,768
EBITDA, $m
  1,575
  1,248
  1,673
  2,192
  2,817
  3,553
  4,406
  5,380
  6,477
  7,699
  9,044
  10,512
  12,100
  13,805
  15,626
  17,558
  19,600
  21,749
  24,005
  26,365
  28,830
  31,400
  34,077
  36,861
  39,756
  42,765
  45,892
  49,141
  52,518
  56,029
  59,680
Interest expense (income), $m
  115
  117
  185
  271
  376
  503
  652
  824
  1,022
  1,244
  1,491
  1,764
  2,061
  2,382
  2,728
  3,096
  3,488
  3,901
  4,336
  4,793
  5,271
  5,770
  6,290
  6,832
  7,396
  7,982
  8,591
  9,225
  9,882
  10,566
  11,277
Earnings before tax, $m
  1,126
  645
  952
  1,326
  1,772
  2,297
  2,902
  3,591
  4,364
  5,222
  6,164
  7,531
  8,638
  9,824
  11,088
  12,428
  13,842
  15,329
  16,888
  18,518
  20,220
  21,993
  23,839
  25,759
  27,755
  29,829
  31,985
  34,225
  36,553
  38,973
  41,491
Tax expense, $m
  100
  174
  257
  358
  479
  620
  784
  969
  1,178
  1,410
  1,664
  2,033
  2,332
  2,652
  2,994
  3,356
  3,737
  4,139
  4,560
  5,000
  5,459
  5,938
  6,437
  6,955
  7,494
  8,054
  8,636
  9,241
  9,869
  10,523
  11,202
Net income, $m
  1,026
  471
  695
  968
  1,294
  1,677
  2,118
  2,621
  3,185
  3,812
  4,500
  5,497
  6,305
  7,171
  8,094
  9,072
  10,105
  11,190
  12,328
  13,518
  14,761
  16,055
  17,403
  18,804
  20,261
  21,775
  23,349
  24,984
  26,684
  28,450
  30,288

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  443
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,481
  9,642
  12,918
  16,933
  21,755
  27,439
  34,028
  41,552
  50,029
  59,466
  69,857
  81,193
  93,457
  106,629
  120,688
  135,613
  151,384
  167,986
  185,406
  203,637
  222,677
  242,528
  263,199
  284,705
  307,065
  330,306
  354,456
  379,553
  405,638
  432,756
  460,957
Adjusted assets (=assets-cash), $m
  7,038
  9,642
  12,918
  16,933
  21,755
  27,439
  34,028
  41,552
  50,029
  59,466
  69,857
  81,193
  93,457
  106,629
  120,688
  135,613
  151,384
  167,986
  185,406
  203,637
  222,677
  242,528
  263,199
  284,705
  307,065
  330,306
  354,456
  379,553
  405,638
  432,756
  460,957
Revenue / Adjusted assets
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
Average production assets, $m
  1,265
  1,735
  2,325
  3,047
  3,915
  4,938
  6,123
  7,477
  9,003
  10,701
  12,571
  14,611
  16,818
  19,188
  21,718
  24,404
  27,242
  30,229
  33,364
  36,645
  40,071
  43,643
  47,363
  51,233
  55,257
  59,439
  63,785
  68,301
  72,995
  77,875
  82,950
Working capital, $m
  -124
  -528
  -708
  -927
  -1,191
  -1,503
  -1,864
  -2,276
  -2,740
  -3,257
  -3,826
  -4,447
  -5,118
  -5,840
  -6,610
  -7,427
  -8,291
  -9,200
  -10,154
  -11,153
  -12,196
  -13,283
  -14,415
  -15,593
  -16,817
  -18,090
  -19,413
  -20,787
  -22,216
  -23,701
  -25,246
Total debt, $m
  2,570
  3,779
  5,532
  7,680
  10,260
  13,301
  16,826
  20,851
  25,387
  30,435
  35,995
  42,059
  48,621
  55,668
  63,189
  71,174
  79,611
  88,493
  97,813
  107,567
  117,753
  128,373
  139,433
  150,938
  162,901
  175,334
  188,255
  201,682
  215,637
  230,145
  245,233
Total liabilities, $m
  3,948
  5,158
  6,911
  9,059
  11,639
  14,680
  18,205
  22,230
  26,766
  31,814
  37,374
  43,438
  50,000
  57,047
  64,568
  72,553
  80,990
  89,872
  99,192
  108,946
  119,132
  129,752
  140,812
  152,317
  164,280
  176,713
  189,634
  203,061
  217,016
  231,524
  246,612
Total equity, $m
  3,532
  4,483
  6,007
  7,874
  10,116
  12,759
  15,823
  19,322
  23,264
  27,651
  32,484
  37,755
  43,458
  49,583
  56,120
  63,060
  70,394
  78,113
  86,214
  94,691
  103,545
  112,775
  122,388
  132,388
  142,785
  153,592
  164,822
  176,492
  188,622
  201,231
  214,345
Total liabilities and equity, $m
  7,480
  9,641
  12,918
  16,933
  21,755
  27,439
  34,028
  41,552
  50,030
  59,465
  69,858
  81,193
  93,458
  106,630
  120,688
  135,613
  151,384
  167,985
  185,406
  203,637
  222,677
  242,527
  263,200
  284,705
  307,065
  330,305
  354,456
  379,553
  405,638
  432,755
  460,957
Debt-to-equity ratio
  0.728
  0.840
  0.920
  0.980
  1.010
  1.040
  1.060
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
Adjusted equity ratio
  0.439
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,026
  471
  695
  968
  1,294
  1,677
  2,118
  2,621
  3,185
  3,812
  4,500
  5,497
  6,305
  7,171
  8,094
  9,072
  10,105
  11,190
  12,328
  13,518
  14,761
  16,055
  17,403
  18,804
  20,261
  21,775
  23,349
  24,984
  26,684
  28,450
  30,288
Depreciation, amort., depletion, $m
  346
  486
  535
  596
  668
  753
  852
  965
  1,092
  1,233
  1,389
  1,218
  1,401
  1,599
  1,810
  2,034
  2,270
  2,519
  2,780
  3,054
  3,339
  3,637
  3,947
  4,269
  4,605
  4,953
  5,315
  5,692
  6,083
  6,490
  6,913
Funds from operations, $m
  337
  957
  1,230
  1,563
  1,962
  2,430
  2,970
  3,586
  4,277
  5,045
  5,889
  6,715
  7,707
  8,770
  9,904
  11,106
  12,375
  13,709
  15,109
  16,572
  18,100
  19,692
  21,350
  23,074
  24,866
  26,729
  28,664
  30,676
  32,766
  34,940
  37,201
Change in working capital, $m
  -102
  -143
  -179
  -220
  -264
  -311
  -361
  -412
  -464
  -517
  -569
  -621
  -672
  -721
  -770
  -817
  -864
  -909
  -954
  -998
  -1,043
  -1,087
  -1,132
  -1,178
  -1,225
  -1,273
  -1,323
  -1,375
  -1,429
  -1,485
  -1,545
Cash from operations, $m
  439
  1,100
  1,410
  1,783
  2,226
  2,741
  3,331
  3,998
  4,742
  5,562
  6,458
  7,336
  8,379
  9,492
  10,674
  11,923
  13,239
  14,619
  16,063
  17,571
  19,143
  20,779
  22,482
  24,252
  26,091
  28,002
  29,987
  32,050
  34,195
  36,425
  38,745
Maintenance CAPEX, $m
  0
  -105
  -145
  -194
  -254
  -326
  -411
  -510
  -623
  -750
  -892
  -1,048
  -1,218
  -1,401
  -1,599
  -1,810
  -2,034
  -2,270
  -2,519
  -2,780
  -3,054
  -3,339
  -3,637
  -3,947
  -4,269
  -4,605
  -4,953
  -5,315
  -5,692
  -6,083
  -6,490
New CAPEX, $m
  -80
  -470
  -590
  -723
  -868
  -1,023
  -1,186
  -1,354
  -1,525
  -1,698
  -1,870
  -2,040
  -2,207
  -2,370
  -2,530
  -2,686
  -2,838
  -2,988
  -3,135
  -3,281
  -3,426
  -3,572
  -3,720
  -3,870
  -4,024
  -4,182
  -4,346
  -4,516
  -4,694
  -4,880
  -5,075
Cash from investing activities, $m
  -2,191
  -575
  -735
  -917
  -1,122
  -1,349
  -1,597
  -1,864
  -2,148
  -2,448
  -2,762
  -3,088
  -3,425
  -3,771
  -4,129
  -4,496
  -4,872
  -5,258
  -5,654
  -6,061
  -6,480
  -6,911
  -7,357
  -7,817
  -8,293
  -8,787
  -9,299
  -9,831
  -10,386
  -10,963
  -11,565
Free cash flow, $m
  -1,752
  525
  676
  867
  1,104
  1,392
  1,734
  2,134
  2,593
  3,114
  3,696
  4,248
  4,954
  5,720
  6,545
  7,428
  8,367
  9,361
  10,409
  11,510
  12,663
  13,868
  15,125
  16,435
  17,797
  19,215
  20,688
  22,219
  23,809
  25,462
  27,181
Issuance/(repayment) of debt, $m
  424
  1,392
  1,753
  2,148
  2,580
  3,041
  3,525
  4,026
  4,535
  5,048
  5,559
  6,065
  6,561
  7,047
  7,521
  7,985
  8,438
  8,882
  9,320
  9,754
  10,186
  10,620
  11,059
  11,506
  11,963
  12,433
  12,921
  13,427
  13,955
  14,508
  15,088
Issuance/(repurchase) of shares, $m
  632
  741
  829
  899
  948
  966
  946
  878
  756
  576
  332
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,031
  2,133
  2,582
  3,047
  3,528
  4,007
  4,471
  4,904
  5,291
  5,624
  5,891
  6,065
  6,561
  7,047
  7,521
  7,985
  8,438
  8,882
  9,320
  9,754
  10,186
  10,620
  11,059
  11,506
  11,963
  12,433
  12,921
  13,427
  13,955
  14,508
  15,088
Total cash flow (excl. dividends), $m
  -719
  2,658
  3,257
  3,915
  4,632
  5,399
  6,205
  7,037
  7,885
  8,738
  9,588
  10,313
  11,515
  12,767
  14,067
  15,413
  16,805
  18,243
  19,729
  21,263
  22,849
  24,488
  26,184
  27,940
  29,760
  31,648
  33,608
  35,646
  37,765
  39,970
  42,268
Retained Cash Flow (-), $m
  -1,553
  -1,211
  -1,523
  -1,867
  -2,242
  -2,643
  -3,064
  -3,499
  -3,942
  -4,388
  -4,832
  -5,271
  -5,703
  -6,125
  -6,537
  -6,940
  -7,334
  -7,720
  -8,100
  -8,477
  -8,853
  -9,231
  -9,612
  -10,000
  -10,398
  -10,807
  -11,230
  -11,670
  -12,129
  -12,610
  -13,114
Prev. year cash balance distribution, $m
 
  260
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,706
  1,734
  2,047
  2,390
  2,756
  3,141
  3,538
  3,943
  4,350
  4,756
  5,042
  5,813
  6,642
  7,529
  8,473
  9,471
  10,523
  11,628
  12,786
  13,995
  15,257
  16,572
  17,940
  19,363
  20,842
  22,378
  23,975
  25,635
  27,361
  29,155
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  1,602
  1,519
  1,664
  1,788
  1,884
  1,947
  1,972
  1,958
  1,906
  1,820
  1,667
  1,641
  1,581
  1,492
  1,378
  1,246
  1,103
  955
  808
  668
  540
  426
  327
  245
  179
  127
  87
  58
  38
  24
Current shareholders' claim on cash, %
  100
  91.6
  85.2
  80.3
  76.5
  73.6
  71.5
  69.9
  68.8
  68.1
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8

Open Text Corporation provides a platform and suite of software products and services that assist organizations in finding, utilizing, and sharing business information from any device. The Company designs, develops, markets and sells Enterprise Information Management (EIM) software and solutions. Its EIM offerings include Enterprise Content Management (ECM), Business Process Management (BPM), Customer Experience Management (CEM), Business Network, Discovery and Analytics. Its software and services allow organizations to manage the information that flows into, out of, and throughout the enterprise as part of daily operations. Its solutions incorporate collaborative and mobile technologies and are delivered for on-premises deployment, as well as through cloud, hybrid and managed hosted services models. In addition, the Company provides solutions that facilitate the exchange of information and transactions that occur between supply chain participants.

FINANCIAL RATIOS  of  Open Text (OTEX)

Valuation Ratios
P/E Ratio 8.4
Price to Sales 3.8
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 19.7
Price to Free Cash Flow 24.1
Growth Rates
Sales Growth Rate 25.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.8%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 67.6%
Total Debt to Equity 72.8%
Interest Coverage 11
Management Effectiveness
Return On Assets 17.9%
Ret/ On Assets - 3 Yr. Avg. 10.6%
Return On Total Capital 20.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.7%
Return On Equity 37.2%
Return On Equity - 3 Yr. Avg. 21.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 66.7%
Gross Margin - 3 Yr. Avg. 67.7%
EBITDA Margin 69.3%
EBITDA Margin - 3 Yr. Avg. 43.9%
Operating Margin 53.6%
Oper. Margin - 3 Yr. Avg. 30.9%
Pre-Tax Margin 49.1%
Pre-Tax Margin - 3 Yr. Avg. 26.5%
Net Profit Margin 44.8%
Net Profit Margin - 3 Yr. Avg. 24.3%
Effective Tax Rate 8.9%
Eff/ Tax Rate - 3 Yr. Avg. 7.7%
Payout Ratio 11.8%

OTEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OTEX stock intrinsic value calculation we used $2291 million for the last fiscal year's total revenue generated by Open Text. The default revenue input number comes from 2017 income statement of Open Text. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our OTEX stock valuation model: a) initial revenue growth rate of 37.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.5%, whose default value for OTEX is calculated based on our internal credit rating of Open Text, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Open Text.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of OTEX stock the variable cost ratio is equal to 79.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for OTEX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.9% for Open Text.

Corporate tax rate of 27% is the nominal tax rate for Open Text. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the OTEX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for OTEX are equal to 55.2%.

Life of production assets of 12 years is the average useful life of capital assets used in Open Text operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for OTEX is equal to -16.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3532 million for Open Text - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 265.167 million for Open Text is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Open Text at the current share price and the inputted number of shares is $8.7 billion.

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COMPANY NEWS

▶ ETFs with exposure to Open Text Corp. : December 12, 2017   [Dec-12-17 01:53PM  Capital Cube]
▶ OpenText Expands Operations in India   [Dec-04-17 09:00AM  PR Newswire]
▶ Lycamobile Builds New Digital Back Office with OpenText   [Nov-28-17 09:00AM  PR Newswire]
▶ OpenText Joins Dell EMC Select Partner Program   [Nov-16-17 09:00AM  PR Newswire]
▶ Open Text beats 1Q profit forecasts   [Nov-02-17 04:45PM  Associated Press]
▶ Is Open Text Corporation (OTEX) Undervalued?   [Sep-21-17 09:40PM  Simply Wall St.]
▶ OpenText Buys Guidance Software   [Sep-14-17 09:00AM  PR Newswire]
▶ ETFs with exposure to Open Text Corp. : August 18, 2017   [Aug-18-17 05:46PM  Capital Cube]
▶ OpenText Finishes Its Fiscal Year With Solid Gains   [Aug-04-17 11:03AM  Motley Fool]
▶ Open Text posts 4Q profit   [Aug-03-17 07:49PM  Associated Press]
▶ OpenText Buys Covisint   [Jul-26-17 04:05PM  PR Newswire]
▶ OpenText Buys Covisint   [04:05PM  CNW Group]
▶ OpenText to Acquire Guidance Software   [08:22AM  PR Newswire]
▶ OpenText to Acquire Guidance Software   [08:22AM  CNW Group]
▶ ETFs with exposure to Open Text Corp. : July 13, 2017   [Jul-13-17 04:23PM  Capital Cube]
▶ OpenText Announces OpenText People Center   [09:00AM  PR Newswire]
▶ ETFs with exposure to Open Text Corp. : July 3, 2017   [Jul-03-17 03:38PM  Capital Cube]
▶ ETFs with exposure to Open Text Corp. : June 22, 2017   [Jun-22-17 04:11PM  Capital Cube]
Financial statements of OTEX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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