Q: Greetings, I am thinking of selling ET and adding to OTEX to consolidate holdings in Canadian technology. How would you compare these companies in terms of their future runway for growth and current valuation? Do you think this is a wise move, or would you sell them both? Thank you.
5i Research Answer:
ET is a bit of a 'sleeper' company, with slow and steady (but not high) growth. It largely trades for its yield, and it is cheap at 14X earnings. We consider it 'OK' but moreso for income. OTEX is much larger and also much cheaper, and still has a 2.5% dividend. It has more leverage, with a fairly high debt level (lower after a division sale expected to close in June) but also higher expected growth. We think a switch from ET to OTEX makes sense.