A sharp drop in the price of Ottawa-based supply chain management player Kinaxis (Kinaxis Stock Quote, Chart, New: TSX:KXS) is an opportunity to buy a market leader at a reasonable price, says Laurentian Bank Securities analyst Nick Agostino.
In a research update to clients today, Agostino maintained his “Buy” rating and one-year target price of $51.50 on Kinaxis, implying a return of 55.5 per cent at the time of publication.
Agostino says the slide in share price for Kinaxis (shares of the company have fallen from $51.40 on January 8 to a close of $33.12 on February 11) aligns its valuation with other high growth tech peers. But the analyst thinks the company deserves a premium because of its low market penetration, sustainable competitive advantage, strong revenue visibility and limited competitive threat.
“With the onset of earnings season, we have seen shares of high growth technology companies, particularly in the U.S., come under pressure on lower than expected 2016 guidance,” says Agostino. “As such, we have seen meaningful compression on KXS’s trading multiple ahead of earnings, with forward EV/Sales swinging in the last 3 weeks from a recent high of 8.0x to 5.0x. Its current multiple is now in line with the aggregate group of Nasdaq listed high growth technology companies.”
On Wednesday, February 17 Kinaxis will report its fourth quarter and fiscal 2015 results. Agostino says he expects Q4 EBITDA of (U.S.) $5.8-million, and adjusted EPS of (U.S.) $0.14 on revenue of (U.S.) $22.5-million.