Financial Survey: Microsoft (NASDAQ:MSFT) vs. Open Text (NASDAQ:OTEX)

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

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Microsoft	$281.72 billion	10.33	$101.83 billion	$16.80	23.32
Open Text	$5.17 billion	1.03	$435.87 million	$2.05	10.73

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Microsoft	39.34%	31.94%	18.47%
Open Text	9.91%	24.77%	7.27%

Institutional and Insider Ownership

71.1% of Microsoft shares are owned by institutional investors. Comparatively, 70.4% of Open Text shares are owned by institutional investors. 0.0% of Microsoft shares are owned by company insiders. Comparatively, 10.6% of Open Text shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Microsoft pays an annual dividend of $3.64 per share and has a dividend yield of 0.9%. Open Text pays an annual dividend of $1.10 per share and has a dividend yield of 5.0%. Microsoft pays out 21.7% of its earnings in the form of a dividend. Open Text pays out 53.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Microsoft has increased its dividend for 23 consecutive years.

Analyst Recommendations

This is a summary of current recommendations for Microsoft and Open Text, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Microsoft	0	6	41	0	2.87
Open Text	0	10	4	0	2.29

Microsoft currently has a consensus price target of $561.20, suggesting a potential upside of 43.22%. Open Text has a consensus price target of $33.67, suggesting a potential upside of 53.07%. Given Open Text’s higher probable upside, analysts plainly believe Open Text is more favorable than Microsoft.

Volatility & Risk

Microsoft has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500. Comparatively, Open Text has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500.

Summary

Microsoft beats Open Text on 14 of the 17 factors compared between the two stocks.

About Microsoft

Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services. This segment also provides LinkedIn; and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate; and on-premises ERP and CRM applications. The Intelligent Cloud segment offers server products and cloud services, such as azure and other cloud services; SQL and windows server, visual studio, system center, and related client access licenses, as well as nuance and GitHub; and enterprise services including enterprise support services, industry solutions, and nuance professional services. The More Personal Computing segment offers Windows, including windows OEM licensing and other non-volume licensing of the Windows operating system; Windows commercial comprising volume licensing of the Windows operating system, windows cloud services, and other Windows commercial offerings; patent licensing; and windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories. Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates. The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.

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.