Eight Capital launches coverage of Kinaxis with a $91.00 target

It has quietly been one of the great performers in the recent history of the Canadian tech space. But Eight Capital analyst Eyal Ofir thinks there is still double-digit upside left in Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS).

In a research report to clients Tuesday, Ofir initiated coverage of Kinaxis with a “Buy” rating and a one-year price target of $91.00, implying a return of 17 per cent at the time of publication.

Ofir yesterday laid out his case for buying Kinaxis, which IPO’d at $13.00 in 2014 and now trades above $80.00.

“Led by a strong management team, KXS continues to take market share counting impressive customers in an industry that is primed for a shift from legacy solutions to a SaaS model,” says the analyst. “We believe that investors should pay a premium multiple for this first class enterprise software name in order to gain exposure to a growth market and a leading technology vendor. Over the longer term, we believe that KXS could become a takeover candidate for a large legacy player, or a new entrant. Looking beyond its impressive 25-30% CAGR, KXS has a strong margin profile that could make it more attractive to a player with a broader market reach or is willing to invest more heavily for growth.”

Ofir thinks Kinaxis will generate EBITDA of $37.8-million on revenue of $143.3-million in fiscal 2017. He expects these numbers will improve to EBITDA of $54.4-million on a topline of $187.2-million the following year.