Q: Hi - of these two stocks, would you be buyers of both at current prices? Do you favour one over the other or are comfortable buying both? Growth objective and held within diversified portfolio. Which of the two would perhaps have greater downside in a recession? In your mind does either have a beta higher than 1 in a mkt downdraft? Thanks as always!
5i Research Answer:
We like both, but would prefer DSG today because of its clean balance sheet (net cash) and growth prospects. OTEX is cheaper and has done well, but has more than $8B in debt and obligations right now, about 7X cash flow. This makes it more vulnerable in a recession. Both curreently show a beta of less than 1, but with its leverage we would expect OTEX to move more in a downturn.