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Open Text Corporation (OTEX) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Open Text Corporation (OTEX)

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Intrinsic Value (DCF)

Current$30.94
→
Intrinsic$40.03
+29%
$20.71$40.03$76.73
Market implies 10% growth for 5 years
OTEX shows 29% potential upside using 14% growth — reasonable if fundamentals hold.
At $31, the market prices in 10% annual cash flow growth — a moderate expectation aligned with historical trends (14%).
Range: Bear $21 → Bull $77. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →10%12%14%16%
8%$52$59$66$73
10%$31$35$40$45
12%$19$22$26$30
14%$12$14$17$20

Bull Case

  • Bull case ($77) offers 148% upside at 17% growth, 9% discount
  • 23% margin of safety vs. base case estimate
  • Market-implied growth (10%) ≤ historical CAGR (14%)

Bear Case

  • Bear case ($21) implies 33% downside at 11% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$784.91M
Year 2$896.26M
Year 3$1.02B
Year 4$1.17B
Year 5$1.33B
Terminal$19.63B

📐 Model Inputs

Growth Rate14.2%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$687.40MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is OTEX stock undervalued or overvalued?
🟢 UNDERVALUED

OTEX trades at $30.94 vs. our DCF-derived intrinsic value of $40.03, implying +24% upside. At a 10.0% WACC and 14.2% projected FCF growth, the market appears to be underpricing the present value of OTEX's future cash flows. The bear case ($20.98) still suggests upside, providing margin of safety.

What is OTEX's intrinsic value?

Using a 5-year DCF model: Base FCF of $687M, projected at 14.2% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $5.49B net debt and dividing by 0.26B shares: Bear $20.98 | Base $40.03 | Bull $66.90. Current price $30.94 implies +24% to base case.

How is OTEX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 14.2% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($16.04B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 23.3x.