While Open Text Corporation (NASDAQ:OTEX) might not have the largest market cap around , it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$44.17 and falling to the lows of US$30.25. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Open Text's current trading price of US$30.25 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Open Text's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What Is Open Text Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 48.49x is currently trading slightly above its industry peers' ratio of 42.28x, which means if you buy Open Text today, you'd be paying a relatively sensible price for it. And if you believe that Open Text should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Open Text's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Open Text look like?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Open Text's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? OTEX's optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at OTEX? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you've been keeping tabs on OTEX, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for OTEX, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 5 warning signs for Open Text (1 is a bit concerning!) and we strongly recommend you look at them before investing.

If you are no longer interested in Open Text, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.