Based in Waterloo, Canada, Open Text Corporation (OTEX) designs, develops, markets and sells information management software and solutions. It offers content services, enterprise networks and security and protection solutions. On the other hand, Upland Software, Inc. (UPLD) provides cloud-based enterprise work management software globally. It offers a family of marketing, sales, contact center and project management software applications under the Upland brand.
Despite cloud-based data security issues, the enterprise software industry is booming with growing demand from almost every business as part of their digital transformation efforts to stand out from the competition. . Additionally, the rise in adoption of hybrid working around the world is benefiting the enterprise software industry. According to a report by Statista, the global enterprise software market is set to grow at a pace CAGR of 8.74% by 2026. Thus, OTEX and UPLD should benefit.
OTEX has gained 1.1% over the past month, while UPLD has negative returns.
But which of these two stocks is a better buy now? Let’s find out.
On February 3, 2022, OTEX announced that it was deepening its strategic partnership with Google Cloud by launching its OpenText Core Content as a Service on Google Cloud. Mark Barrenechea, CEO and CTO of OpenText, said, “Distributed working is here to stay and organizations need to ensure they have the right technology, information and processes in place to meet the expectations of employees and client.”
On March 10, 2022, UPLD announced the opening of a Center of Excellence in Bengaluru, India as part of its continued offshore expansion efforts. This new CoE will serve as the cornerstone of Upland’s global engineering, further accelerating the company’s ability to deliver customer-focused digital transformation solutions through its growing library of more than 31 products.
Recent financial results
OTEX’s total revenue increased 2.5% year-over-year to $876.80 million for the fiscal second quarter ended December 31, 2021. The company’s net income s amounted to $88.30 million, compared to a loss of $65.50 million in the year-ago quarter. Additionally, its EPS came in at $0.32, compared to a loss of $0.24 a year ago.
UPLD’s total revenue decreased 3% year-over-year to $75.70 million for the fiscal first quarter ended December 31, 2021. The company’s net loss was amounted to $7.50 million, a 31.6% year-over-year increase. Additionally, its loss per share was $0.24, up 26.3% year-over-year.
Past and expected financial performance
Over the past three years, OTEX’s revenue and EBITDA have grown at CAGRs of 6.5% and 6.1%. Analysts expect OTEX’s revenue to grow 4.7% for the quarter ending June 30, 2022 and 4.5% for fiscal 2023. The company’s EPS is expected to rise 7% for the quarter ending June 30, 2022 and 11% for fiscal 2023. Additionally, its EPS is expected to grow at a rate of 11.7% per annum over the next five years.
On the other hand, UPLD’s revenue and EBITDA grew at CAGRs of 26.3% and 4.6%, respectively, over the past three years. The company’s revenue is expected to increase 5.6% for the quarter ending June 30, 2022 and 4.2% in fiscal 2023. Its EPS is expected to increase 9.8% for the quarter ending June 30, 2022 and 8.3% in fiscal 2023. UPLD’s EPS is expected to grow at a rate of 20% per annum over the next five years.
OTEX’s trailing 12-month revenue of $3.44 billion is significantly higher than UPLD’s $302.02 million. OTEX is also more profitable with gross profit margin and EBITDA margin of 75.55% and 29.40% compared to UPLD of 67.07% and 13.07%, respectively.
Additionally, OTEX’s ROE, ROA, and ROTC are 12.13%, 4.47%, and 5.40% from negative UPLD values.
In non-GAAP terms of the last 12 months PER, OTEX is currently trading at 13.36x, 39.3% higher than UPLD’s 9.59x. Additionally, OTEX’s trailing 12-month EV/EBITDA ratio of 11.50x is 28.2% higher than UPLD’s 8.97x.
So, UPLD is relatively affordable here.
OTEX has an overall rating of A, which equates to a strong buy in our own POWR Rankings system. On the other hand, UPLD has an overall rating of C, which translates to Neutral. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OTEX has a B rating for Sentiment. On the other hand, UPLD has a D rating for Sentiment.
Additionally, OTEX has a B rating for stability, while UPLD has a C stability rating.
Of the 163 shares of Software app industry, OTEX is ranked #8, while UPLD is ranked #60.
Beyond what I said above, we also rated the stocks in terms of quality, momentum, growth and value. Click here to view all OTEX ratings. Also get all UPLD ratings here.
Rapid digital transformation and growing demand for cloud is expected to drive the growth of the enterprise software market for an extended period. Thus, OTEX and UPLD should benefit. However, it is better to bet on OTEX because of its superior finances and profitability.
Our research shows that the odds of success increase when investing in stocks with an overall buy or strong buy rating. See all other top rated stocks in Software – Applications here.
Shares of OTEX fell $0.02 (-0.05%) in after-hours trading on Tuesday. Year-to-date, OTEX is down -7.20%, compared to a -5.34% rise in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
At Nimesh Jaiswal a fervent interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles. Continued…