Now’s the time to be buying supply chain management company Kinaxis (Kinaxis Stock Quote, Chart, News TSX:KXS), says portfolio manager Jamie Murray, who argues that with the company’s future looking so bright, investors should be taking advantage of any pullbacks to add KXS to their portfolios.
Kinaxis has already had a remarkable year, with its share price now hanging around a double and the company firing on all cylinders in its quarterly reports. Kinaxis’ cloud-based platform delivered in its recent second quarter earnings, for example, where revenue grew 45 per cent year-over-year to $61.4 million and EBITDA practically doubled from Q2 2019 to $22.5 million, representing a margin of 37 per cent compared to 27 per cent a year earlier.
Investors have taken notice, driving up KXS fairly quickly after the market downturn in late February/early March. From there, Kinaxis streaked to gains on the year of over 100 per cent before settling down over more recent weeks.
But the tech selloff that started last Thursday should present an opportunity, says Murray, head of research for the Murray Wealth Group, who spoke on BNN Bloomberg last Friday.
“Kinaxis is one of our great Canadian tech companies. They have software that really helps companies optimize their supply chain and they’ve had lots of big contract wins,” Murray said.
“This type of software and what they do became even more important with COVID when we saw manufacturing supply chains gets very disrupted. So, we think this is going to be an area that companies continue to look at investing in and we think Kinaxis should see its sales accelerate in the next couple of years,” he said.
“It’s a little bit longer of a sales cycle, more of a top-down decision than a lot of these high-flying SaaS names that are more bottom-up, developer-focused products, so this one really comes as an organization-wide decision but, yeah, it’s been a great company in our Canadian portfolio,” Murray said.
Kinaxis has brought in some major contract wins in recent years, coming when its Rapid Response platform branched out from the tech and pharma sectors to places like CPG companies, manufacturing and autos.
Companies from Procter & Gamble and Cisco to Toyota and Dyson all use Kinaxis, while just last week KXS announced a new deal with defense giant L3Harris.
“Kinaxis will help L3Harris enable collaboration with internal stakeholders as well as customers and suppliers on sales and operation trade-offs, engineering changes and supply chain disruptions – all critical to meeting targets. Leveraging the power of Kinaxis RapidResponse and its unique concurrent planning technique, L3Harris gains a single, scalable SaaS planning platform that synchronizes the company's supply chain,” the company said in a September 2 press release.
Murray said investors would be wise to add Kinaxis on the dip.
“It’s one of our largest holdings, and especially on days like [Friday] when you see these pullbacks. These are when you want to start to jump into these names or average down or buy more,” Murray said.