Financial Analysis: Open Text (NASDAQ:OTEX) and Adobe (NASDAQ:ADBE)

Open Text (NASDAQ:OTEX) and Adobe (NASDAQ:ADBE) are both computer and technology companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and price targets for Open Text and Adobe, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Open Text	1	8	2	0	2.09
Adobe	2	8	15	2	2.63

Open Text presently has a consensus target price of $32.30, suggesting a potential upside of 5.21%. Adobe has a consensus target price of $473.88, suggesting a potential upside of 27.82%. Given Adobe’s stronger consensus rating and higher possible upside, analysts clearly believe Adobe is more favorable than Open Text.

Valuation and Earnings

This table compares Open Text and Adobe”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Open Text	$5.77 billion	1.36	$465.09 million	$2.45	12.53
Adobe	$21.51 billion	7.31	$5.56 billion	$15.63	23.72

Adobe has higher revenue and earnings than Open Text. Open Text is trading at a lower price-to-earnings ratio than Adobe, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Open Text and Adobe’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Open Text	12.55%	22.49%	6.77%
Adobe	30.39%	53.68%	24.17%

Risk and Volatility

Open Text has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, Adobe has a beta of 1.51, meaning that its share price is 51% more volatile than the S&P 500.

Institutional and Insider Ownership

70.4% of Open Text shares are held by institutional investors. Comparatively, 81.8% of Adobe shares are held by institutional investors. 10.6% of Open Text shares are held by insiders. Comparatively, 0.2% of Adobe shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Adobe beats Open Text on 14 of the 15 factors compared between the two stocks.

About Open Text

Open Text Corporation provides information management software and solutions. The company offers content services, which includes content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving; and operates experience cloud platform that provides customer experience and web content management, digital asset management, customer analytics, AI and insights, e-discovery, digital fax, omnichannel communications, secure messaging, and voice of customer, as well as customer journey, testing, and segmentation. It also provides cybersecurity cloud solutions to protect, prevent, detect, respond and quickly recover from threats across endpoints, network, applications, IT infrastructure and data, AI-led threat intelligence; and to protect critical information and processes through threat intelligence, forensics, identity, encryption, and cloud-based application security. In addition, the company offers business network cloud for digital supply chains and secure e-commerce ecosystems including digitize and automate procure-to-pay and order-to-cash processes; IT operations management cloud for automation and advancement of IT support and asset management; and analytics & AI cloud solutions that offers artificial intelligence with practical usage to provide organizations with actionable insights and better automation, such as visualizations, advanced natural language processing and understanding, and integrated computer vision capabilities. In addition, it provides application automation cloud, developers cloud, and services. Further, it has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, DXC Technology Company, Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting LLP, Hewlett Packard Enterprises, and Tata Consultancy Services. Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.

About Adobe

Adobe Inc., together with its subsidiaries, operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content; and Document Cloud, a unified cloud-based document services platform. Its flagship product is Creative Cloud, a subscription service that allows members to access its creative products. This segment serves content creators, students, workers, marketers, educators, enthusiasts, and communicators. The Digital Experience segment provides an integrated platform and set of applications and services that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences from analytics to commerce. This segment serves marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, and executives across the C-suite. The Publishing and Advertising segment offers products and services, such as e-learning solutions, technical document publishing, web conferencing, document and forms platform, web application development, and high-end printing, as well as Advertising Cloud offerings. It also provides consulting, technical support, and learning services. The company offers its products and services directly to enterprise customers through its sales force and local field offices, as well as to end users through app stores and through its website at adobe.com. It also distributes products and services through distributors, value-added resellers, systems integrators, software vendors and developers, retailers, and original equipment manufacturers. The company was formerly known as Adobe Systems Incorporated and changed its name to Adobe Inc. in October 2018. Adobe Inc. was founded in 1982 and is headquartered in San Jose, California.