DCF Studio

    OTEX.TO · TOR · Technology

    Open Text Corporation

    Also onConsensus Drift

    Implied value per share

    CAD 112.27

    Market price

    CAD 31.53

    Implied upside

    +256.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 112.27+256.1%
    Exit multiple
    CAD 70.72+124.3%
    Market price
    CAD 31.53

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 5.5bnUSD 5.8bnUSD 6.1bnUSD 6.5bnUSD 6.8bn+5.4%
    EBITUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.3bn+5.4%
    NOPATUSD 774.7mUSD 816.3mUSD 860.1mUSD 906.2mUSD 954.9m+5.4%
    Add depreciation & amortisationUSD 727.5mUSD 766.5mUSD 807.6mUSD 851.0mUSD 896.6m+5.4%
    Less capital expenditureUSD -167.1mUSD -176.1mUSD -185.5mUSD -195.5mUSD -206.0m+5.4%
    Less increase in working capitalUSD -1.9mUSD -2.0mUSD -2.1mUSD -2.2mUSD -2.3m+5.4%
    Free cashflow to firmUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.6bn+5.4%
    Discount factor0.96770.90610.84840.79440.7438-
    Present valueUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.2bnUSD 1.2bn-1.3%
    Present Value Of The ForecastUSD 6.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.019Reported 1.028, pulled toward 1.0 (Blume)
    Cost of equity8.90%Risk-free + beta x equity risk premium
    Cost of debt5.58%Interest expense / average total debt
    Market capitalisationUSD 7.7bn56.2% of capital
    Total debtUSD 6.0bn43.8% of capital, book value as a proxy
    Tax rate26.5%Effective, capped at statutory
    WACC6.80%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 80.29

    75% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 1.6bn
    Less reinvestment at g/ROIC (34.5% of NOPAT)
    USD -556.4m
    Capitalised
    USD 1.1bn
    ROIC (reported)
    7.3%
    Terminal value, undiscounted
    USD 25.2bn
    Terminal value, discounted
    USD 18.8bn
    Enterprise value
    USD 25.0bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 20.0bn

    Exit at 6.9x EBITDA

    Value per shareUSD 50.58

    64% of EV

    Terminal value, undiscounted
    USD 15.3bn
    Terminal value, discounted
    USD 11.4bn
    Enterprise value
    USD 17.6bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 12.6bn

    Spread between methods: 45%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.80%134.23144.67159.49182.34222.54
    5.80%99.73103.34107.94114.06122.69
    6.80%78.2279.1880.2981.6183.22
    7.80%64.5864.8865.1765.4765.77
    8.80%55.0355.2955.5455.7956.04

    Outlined: this model. Green text: above today's price of 22.55. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.4%-13.5%-18.9pp
    EBIT margin19.1%0.5%-18.6pp
    Discount rate6.8%15.7%+8.9pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.