Otics It is one of the most compelling value settings I see in software.
Key metrics:
• P/E: 11.29 (really inexpensive for a profitable software company)
• Forward P/E: 5.16 (the market is pricing the stock at only five times expected earnings)
• PEG: 0.38 (less than 1.0 is usually considered undervalued compared to growth)
• P/FCF: 6.74 (less than 10 years are generally considered cheap)
• EV/EBITDA: 6.12 (less than 8 years is often viewed as undervalued)
• Operating margin: 21.86% (20%+ indicates a very profitable business)
• Earnings Yield: 5.5% (Get paid while you wait)
Management is divesting non-core assets, expanding a $500 million buyback program, and increasing focus on cloud and artificial intelligence initiatives.
The market appears to value OTEX as a company in decline, yet the company continues to generate strong cash flow, maintain healthy margins, and return capital to shareholders.
When a profitable software company trades at 11x today’s earnings, 5x forward earnings, and less than 7x free cash flow, I think it’s worth a closer look.
