After spending some time on the road with the company’s management team, National Bank Financial analyst Richard Tse is feeling even more positive about Kinaxis (TSX:KXS).
In a research update to clients today, Tse maintained his “Buy” rating, but raised his one-year price target on Kinaxis from $80.00 to $85.00.
Tse says investors who feel they missed the boat on Kinaxis still have time to get in because its growth story appears to be accelerating. He says his time spent with management last Friday provided evidence of this.
“If we had any takeaway, it would be the unbridled enthusiasm and positive tone expressed by management throughout the day,” says Tse. “Our read was that enthusiasm was coming from a continued, if not accelerated execution on a number of growth drivers. Together, those drivers have not only increased the size of Kinaxis’ funnel, but also the potential “close” rates. Management’s upbeat tone was consistent with the non-management data points we’ve picked up from Kinaxis’s user conference late last year through to today.”
Tse say while some might be inclined to look for signs of slowing growth, given Kinaxis’s tremendous share price appreciation, he sees evidence of the opposite.
“In our view, while Kinaxis continues to see expansions with its existing customer base – we believe the pace of wins is on the rise due in part to the partner channel. To us, that’s more than likely why Kinaxis has seen its target base of prospects move from 1,400 to 1,600 and why the ratio of new / existing customers has gone from 50/50 to 65/35. And given a customer base of around 100 today, with many not fully deployed across their enterprise; that combined potential of new and expansion orders is why we believe KXS continues to have a lot more upside despite the elevated near-term valuation.”
Tse thinks Kinaxis will generate EBITDA of $33.7-million on revenue of $140.3-million in fiscal 2017. He thinks these numbers will improve to EBITDA of $42.2-million on a topline of $171.1-million the following year.