Kinaxis is fully valued, says Industrial Alliance

Ahead of the company’s second quarter results, Industrial Alliance Securities analyst Blair Abernethy thinks the spectacular run of Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS) shares should be on pause mode.

On August 3, after market close, Kinaxis will report its Q2, 2017 results. Abernethy thinks Kinaxis will post EPS of $0.24 and EBITDA of $9.2-million on revenue of $34.7-million, in-line with the street consensus of $0.23 in EPS and EBITDA of $9.2-million on a topline of $35.2-million.

Abernethy says that while Kinaxis’s growth is impressive, the stock has gotten ahead of itself. In a research update to clients today, the analyst maintained his “Hold” rating and one-year price target of $78.00 on the stock, implying a return of -3.3 per cent.

“While we believe Kinaxis can sustain its 20%+ top line growth rate, at current levels we believe most of this growth is currently priced into the stock,” the analyst says. “We value Kinaxis on a blended EV/Sales, EV/FCF and DCF basis on 2018E, to arrive at our 12-month price target of C$78.00. The stock is trading at 10.1x EV/Revenue on 2017E, which we consider to be towards the upper end of the range of comparable SaaS/Supply Chain Management vendors.”

Abernethy thinks Kinaxis will post Adjusted EBITDA of $36.9-million on revenue of $142.2-million in fiscal 2017. He expects those numbers will improve to EBITDA of $47.3-million on a topline of $175.6-million the following year.