Market Perform/Speculative - Price 40.24 on Oct. 20
by Morgan Keegan Equity Research

Open Text is in the enterprise-content-management business. With its recent acquisition of Vignette, OTEX has close to 18% market share, second only to International Business Machines (IBM). Open Text is the largest pure-play content-management vendor. Open Text has made a number of acquisitions over the past few years to bolster its technology platform....For the September quarter, we're looking for EPS of 63 cents, on revenue of $214 million, ahead of consensus estimates of 58 cents and $210 million. We would note that there's a wide range of Street estimates, where we skew to the high end for both EPS and revenue. We believe currency will provide a revenue tailwind and an operating-expense headwind....OTEX shares now trade at a 12.1 times enterprise value/free-cash-flow multiple, below the average of similar vendors trading at a 13.5 times average. We are growing increasingly positive on the name, and would probably start building long-term positions on weakness. We believe fair value is in the 45 to 46 range. Market cap: $2.3 billion.

For Fitzpatrick's take, click here.

Breakout

Forward PE: 11.54 Short Ratio: 23.4

20.4

32.3

PE of 55 and a PEG of 0.91 .

Momentum High Volume Great fundamentals pick. Bought 11/30 at $33.17

16.4 0.62

Open Text (OTEX) was upgraded from Sell to Neutral, Merrill Lynch said. Company posted solid quarterly results, though uncertainty about future growth remains.

Open Text is a Waterloo, Ontario, company selling software for managing databases filled with graphics files and other unwieldy data. Assay Research isn't alone in questioning the acquisition accounting at Open Text. A tiny paragraph in the company's latest annual report notes that the staff of the Securities and Exchange Commission has questioned Open Text's financial report for the fiscal year ended June 2005 and the three subsequent quarters.