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Last week, you might have seen that Open Text Corporation (NASDAQ:OTEX) released its yearly result to the market. The early response was not positive, with shares down 6.2% to US$37.83 in the past week. It was a credible result overall, with revenues of US$3.5b and statutory earnings per share of US$1.46 both in line with analyst estimates, showing that Open Text is executing in line with expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
See our latest analysis for Open Text
After the latest results, the seven analysts covering Open Text are now predicting revenues of US$3.59b in 2023. If met, this would reflect an okay 2.7% improvement in sales compared to the last 12 months. Per-share earnings are expected to accumulate 5.6% to US$1.58. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.66b and earnings per share (EPS) of US$1.94 in 2023. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$52.50 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Open Text, with the most bullish analyst valuing it at US$60.00 and the most bearish at US$46.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Open Text's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 2.7% growth on an annualised basis. This is compared to a historical growth rate of 7.2% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that Open Text is also expected to grow slower than other industry participants.