Kinaxis looking fully valued ahead of Q4 results, says Industrial Alliance

Shares of Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS) just seem to go up and up, but Industrial Alliance Securities analyst Blair Abernethy thinks that may be coming to an end, or at least taking a pause, soon.

On February 28, after market close, Kinaxis is expected to report its fourth quarter and fiscal 2016 results. Abernethy expects the company will post EPS of $0.17 and EBITDA of $6.9-million on revenue of $30.3-million. The street consensus has the company posting EPS of $0.18 and EBITDA of $7.2-million on a topline of $30.5-million.

Abernethy says that in the short term, Kinaxis is looking fully valued. But in the long-term the analyst thinks the company is in the early days of its market opportunity. He leaves the window open for a revision of his current forecasts and valauation.

“While Kinaxis’ stock has recently approached our 12-month target price, we still see several potential upcoming catalysts in 2017,” he says, offering that these could include new large contract wins and customer adds, improved traction in newer verticals such as automative, and contributions from partners such as Accenture and Deloitte.

“We believe that Kinaxis is still in the relatively early stages of a long-term secular growth opportunity and expect the Company to be able to continue to grow recurring revenues at 20%+ for at least another three to four years,” says Abernethy. “We believe Kinaxis’ technology plays an important role in the “digitization” of the manufacturing supply chain. We see opportunities for product development, which could deepen customer penetration, enhance ROI, and further competitive differentiation, such as enhanced visibility within and outside of the organization, advanced analytics, leveraging Internet-ofThings (IoT) data flows, and incorporation of machine learning technology.”

In a research update to clients today, Abernethy maintained his “Buy” rating and one-year price target of $68.00 on Kinaxis, implying a return to -9.6 per cent at the time of publication.

Abernethy thinks Kinaxis will post Adjusted EBITDA of $29.0-million on revenue of $116-million in fiscal 2016. He thinks these numbers will improve to EBITDA of $37.1-million on a topline of $142.1-million in fiscal 2017.