Kinaxis (Kinaxis Stock Quote, Chart TSX:KXS) remains a high quality top line growth story, says Laurentian Bank Securities analyst Nick Agostino who in a Thursday action note to clients reiterated his “Buy” recommendation and target price of C$105.00.
for KXS, representing a projected return of 18.1 per cent at the time of publication.
Ahead of Kinaxis’ third quarter financials on November 9, Agostino expects KXS to generate in-line results on sales at $39.5 million, EBITDA of $10.5 million and adj. EPS of $0.23 (all figures in US dollars unless otherwise noted). Drilling down, the analyst is looking for subscription sales of $28.4 million with the company ending Q3 with $175.0 million in net cash.
Agostino says that he’ll be focusing on three main items driving his growth expectations: (1) continued momentum in Kinaxis’ Life Sciences/Autos segments; (2) market penetration in consumer packaged goods; and (3) increased penetration into a new vertical, viz. process manufacturing.
“From our observations at the User Conference, we believe Life Sciences, CPG, High Tech, and Food & Beverage remain solid growth areas for KXS based on client and prospect attendees/feedback,” says Agostino.
The analyst bases his target price on a 9x his 2019/2020 sales estimate valuation.
“As witnessed in the past, management has a track record of raising guidance as the year plays out, and as contract visibility improves. Given the momentum evident at the User Conference and the upped guidance in Q2, we see a similar potential as 2018 firms up,” he says. “In light of the recent market sell-off and with KXS’s growth trajectory on solid ground, we believe an attractive entry point is before investors.”
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