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Kinaxis is a buy despite “premium” valuation, Paradigm Capital says

Kinaxis 2020

Kinaxis 2020 Ahead of the company’s fourth quarter results, Paradigm Capital analyst Kevin Krishnaratne is feeling more bullish about Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS).

On Wednesday, Kinaxis will report its Q4 and fiscal 2017 results. The analyst expects the Ottawa-based company will generate EBITDA of $9.31-million on revenue of $34.71-million, a topline that would be up 14.7 per cent over the same period a year prior.

Krishnaratne says he expects KXS’s success to continue.

“Our positive view heading into the quarter reflects our confidence in Kinaxis’ ability to drive upside to subscription revenue growth for Q4/17 and deliver better-than-expected guidance for 2018, which will be introduced alongside earnings,” the analyst says. “We continue to remain positive on Kinaxis’ growth opportunity given its low market penetration (sub-10%) and increasing pace of larger customer wins driven by Partners. We continue to point to KXS’ mix of adjusted subscription revenue growth/EBITDA margin mix at 29%/29% forecast for 2017 as favourable to other SaaS peers we track and is what drives our premium valuation on the stock.”

In a research update to clients today, Krishnaratne maintained his “Buy” rating on Kinaxis, but raised his one-year price target on the stock from $80.00 to $91.00, implying a return of six per cent, including dividend, at the time of publication.

Krishnaratne thinks Kinaxis will generate EBITDA of $28.5-million on revenue of $116.0-million in fiscal 2016. He expects those numbers will improve to EBITDA of $38.2-million on a topline of $133.6-million the following year.

The analyst Tuesday explained his overriding thesis on the stock.

“Kinaxis is in the early stages of its opportunity to revolutionize supply chain planning for large multinational manufacturers,” he explained. “RapidResponse has been recognized as the industry’s leading supply chain planning tool, with Kinaxis’ customers achieving materially better forecasting capabilities through its usage to drive strong ROI. RapidResponse serves as an essential tool for manufacturers who rely on it daily for their strategic decision making. Despite an already impressive +30 year history, we believe the best is yet to come as Kinaxis starts to drive larger and more complex RapidResponse deployments via the Partner channel, leveraging some of the world’s largest system integrators such as Accenture & Deloitte.”

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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