Kinaxis Inc (KXS.TO)

Sector's under pressure from risk of AI disruption. Has never been consistently profitable. Early innings of shaking out software winners and losers. This may or may not be the bottom. If you step in, do so incrementally.

Used to have premium valuation, now de-rated quite a bit. Complex supply-chain software, and really has its hooks into customers. But save your software investing budget for MSFT or NOW or WDAY, all trading at lower valuations.

You don't have to sell, but don't rush to buy more. See his Top Picks.

We don't want to shrug off the threat of AI on software, but we have a hard time seeing how a company utilizes AI in-house to create a competitive supply chain and logistics solution. We think AI is more likely to be something that can be built into current offerings or lead to new offerings for companies like this but it will take time on teh AI side of things. Recent quarters have showed there might be a bit of a turnaround at hand so we think it is worth giving them another quarter here to see if the trend continues.
Unlock Premium - Try 5i Free

It has a strong balance sheet with $260M net cash. EPS is set to surge this year and rise another 25%+ next year. Cash flow is good and it is a relatively conservative company overall. As a supply chain software solution, it is winning global clients and has good retention. Shares are up about 16% YTD. It may not be 'exciting' but it is reliable and does have good long term growth potential. The last quarter nicely beat estimates.
Unlock Premium - Try 5i Free 

An excellent tech company, one of the few tech stocks up this year because their products are in demand now. Margins are already improving. Will announce a new CEO soon which will be another catalyst. They have the best technology but sales execution was weak, but they can fix this. Is a takeover target in coming years. Volatile, though. It moves a lot. He buys below $160-170.

Analyst estimates are rising, sales growth is still in the low to mid-double digits, and analyst estimates call for a continuation of that trend over the next few years. Earnings estimates are projected to grow even faster, and while gross margins have fallen over the past few years, its net profit margins are OK, and it generates strong free cash flows. Its earnings have been somewhat lumpy, and most of the issue that is holding its price back has been valuation. Its forward P/E has contracted from almost 100X in 2020 to 38X today. We believe at a certain level, its valuation combined with solid sales growth will become too attractive to ignore for investors, and we believe we are nearing that range. Analysts estimate by the end of this year, if its price remains flat, it will trade around 29X forward earnings, which we feel is fairly attractive for a Canadian SaaS name growing at double digits.  
Unlock Premium - Try 5i Free

Quite choppy. Stuck in a wide trading range between about $130-200 for the last 3 years. Right now, on an upswing. Broken out over $175. So far, so good. Question is how far does it go? Previous resistance was around $200-ish. Still a bit of technical upside, but do recognize it's been more of a swing-trading stock.

Recent quarter fairly good. A lot of metrics increased. Share price fairly high - would recommend waiting for a slight decrease. Better/cheaper names to invest in. Overall, a good company. Wait before buying. 

Has been expensive for a long time, but earnings are steadily rising, enough to make it reasonable priced and maybe attractive.

It faced some financial headwinds in 2020 and lost money in 2021 but then did better. It looks like profits will continue to grow and he considers it a 'show me' story.

Insider ownership not high enough to justify investment. Return on capital also not high enough. No debt is positive. Margins also trending down. Would give this company a pass for now. Neutral company based on first glance. 

In the recent quarter, revenue grew 25%, annual recurring revenue was up 22% and adjusted EBITDA margin improved to 14% from 13% last year. The company continues to show solid execution with strong organic growth, and the Saas business model is starting to generate meaningful cash flow and profitability, and strong switching costs for customers. We still like the name, and we think the recent drop may provide investors opportunity to average into the position. Since KXS never issues new shares (it has lots of cash) it does not get much broker attention and thus can sometimes 'drift' lower.
Unlock Premium - Try 5i Free

Kinaxis is at the top of its class. It has a great product but is pricey and can be volatile. It offers high growth but he is more of a value stock investor. He owned it for a long time and took profits at $180.00

Will continue to do well. Growing really fast. Hit an EPS growth target of 15% every year for the last decade. Really likes the story.

Nice niche. SaaS in the cloud, but caters to supply chains with a rapid response platform. An example of SaaS that can incorporate generative AI. Swings between profitability and not. For such a big company, it should be more consistent. Price target of $220.