1 Practically Perfect Canadian Stock Down 24% to Buy and Hold Forever

A practically perfect Canadian stock to buy while it’s down has a simple recipe: the market gets grumpy, but the business keeps doing the boring, cash-generating work. You want recurring revenue, sticky customers, and a product that still matters even when budgets tighten. You also want management that uses cash wisely, like buying back shares and paying a dividend, instead of chasing shiny distractions. When all of those line up, a drop in price can look more like a sale than a warning.

OTEX

On the surface, OpenText (TSX:OTEX) may not look like it fits with its share price up. But in the longer term, investors still get value. The tech stock sells enterprise software that helps big organizations manage, secure, and use their information. It focuses on areas like content management, IT operations, customer experience tools, and security. This kind of software tends to embed itself into daily workflows, which makes customers less likely to rip it out quickly.

Over the last year, the storyline has been focused and simplified. OpenText worked to sharpen its portfolio and its message around information management in an artificial intelligence (AI)-heavy world, including its Aviator AI offerings. It has also been active around divestitures and streamlining, which fits the idea of trimming what is non-core and putting more attention on products that can scale profitably. Leadership also shifted, with Ayman Antoun stepping into the CEO role, and the Canadian stock framed that transition as steady rather than disruptive.

Valuation is where the “practically perfect while it’s down” pitch gets tempting. The market has priced OpenText more like a mature, slower-growth software company than a fast-growth tech darling, which can make the shares look inexpensive relative to the cash flow profile. The risk is that growth stays muted for longer than investors want, competition stays intense, and customers take longer to modernize than the market’s patience allows.

Earnings support

In its fiscal second quarter of 2026, OpenText reported total revenue of $1.34 billion. Cloud revenues came in at $478 million, up 3.4% year over year, and annual recurring revenues totalled $1.06 billion. It also posted quarterly enterprise cloud bookings of $295 million, up 18% year over year, which is a useful signal that customers still sign new and expanding cloud deals.

Profitability stayed chunky. OpenText reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $491 million, which worked out to a 37.0% margin. Net income came in at $168 million, and diluted earnings per share (EPS) were $0.66 on a generally accepted accounting practices (GAAP) basis and $1.13 on a non-GAAP basis. Cash flow mattered, too. Operating cash flow was $319 million, and free cash flow was $279 million in the quarter. That’s the kind of cash generation that makes a buy-and-hold story feel real, even if the market stays unimpressed for a while.

Looking ahead, the outlook hinges on execution, not buzzwords. OpenText needs to keep moving customers to cloud subscriptions, keep bookings healthy, and make its AI positioning feel tangible in results. Capital allocation also matters a lot here. In February 2026, the Canadian stock increased its fiscal 2026 share-repurchase program to US$500 million, and said it already purchased about US$190 million of shares for cancellation as of Jan. 31, 2026. If the Canadian stock can keep buying back shares while maintaining financial flexibility, long-term holders can benefit even during periods when the stock feels stuck.

Bottom line

In the end, OpenText can look practically perfect while it’s down if you want a Canadian tech name with real cash flow, recurring revenue, and management leaning into buybacks and portfolio focus. Meanwhile, investors still get a solid 4.41% dividend that a $7,000 investment turns into cold, hard cash.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTOTEX$34.02205$1.49$305.45Quarterly$6,974.10

If you can be patient and you want a steady compounder rather than a headline stock, OTEX has a credible “buy and hold forever” angle when the price feels on sale.

The post 1 Practically Perfect Canadian Stock Down 24% to Buy and Hold Forever appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.