Alright I’ve to admit, sure, this TSX inventory is down, however that’s solely if you take a look at it over the past 5 years. In that case, OpenText (TSX:OTEX) has dropped, whereas climbing 16% within the final yr. But there’s a cause I’ve achieved this evaluation, and it’s to not trick you. It’s to point out buyers one factor: there’s extra progress to come back.

So at this time, let’s take a look at what makes OTEX so magnificent for buyers wanting in on a tech inventory that’s rebounding onerous. Moreover, let’s delve into why it’s a tech inventory going by way of a restructuring that’s solely in its beginnings.

Why purchase

OTEX has really been round for many years. Originating in Waterloo, Ontario, the agency has expanded from the standard beginnings of placing Miriam Webster on-line, to extra profitable income streams. Now, it focuses on enterprise administration software program, partnering with cybersecurity corporations and serving to to choose up contracts with authorities and a few of the largest corporations on the earth.

This has confirmed fairly profitable, particularly now by way of investments in agentic synthetic intelligence (AI) software program. The tech inventory continues to see increased recurring income, with cloud revenues up 2% and annual recurring income rising as effectively. Enterprise cloud bookings additionally climbed 32% final quarter yr over yr, supporting extra predictable money stream.

Working money stream was additionally sturdy and free money stream substantial, with administration returning $683 million in buybacks and dividends for full-year 2025. What’s extra, the valuation nonetheless seems to be affordable buying and selling at 9 occasions earnings. Subsequently, the market has nonetheless not caught as much as its large premium, particularly with AI and safety merchandise in addition to main partnerships driving increased bookings as effectively.

What to observe

Now after all no inventory is completely excellent. The shift in direction of agentic AI has created debt, debt that hasn’t been utterly lined by its sale of Micro Focus. As we speak, complete debt sits at $6.7 billion, with a excessive debt-to-equity (D/E) ratio at 169%. So persistent income weak spot might pressure the stability sheet and restrict flexibility.

Whole income yr over yr actually was down 10%, with ARR additionally down. So administration’s present steerage displays modest progress. Moreover, earnings per share (EPS) can present yr over yr swings from one offs and legacy gadgets. And with a 2.9% dividend yield and 64% payout ratio, it’s steady however not precisely an earnings inventory.

What buyers would possibly wish to take into account then is shopping for OTEX regularly by way of dollar-cost averaging, fairly than one giant buy. What’s extra, dimension your place to match your threat tolerance. From there, proceed to observe quarters and search for cloud ARR (annual recurring income) progress, FCF (free money stream) progress for dividend and buyback protection, and decrease debt.

Backside line

General, OTEX seems to be like a tech inventory that’s been by way of all of it, and continues to seek out new methods of increasing by way of recurring income streams. It’s due to this fact a stable long-term maintain for buyers wanting in on Canadian software program corporations, all whereas receiving dividend earnings that appears as if it may possibly final! Nonetheless, at all times make sure that to keep watch over your investments, and focus on any buy together with your monetary advisor.