Kinaxis’ Accelerated Growth Continues to Attract Analyst Attention But Retail Investors Fail to Take Notice

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The Ottawa-based supply chain software firm has just gotten started penetrating its total addressable market

Shares of Kinaxis (TSE:KXS, OTCMKTS:KXSCF), an Ottawa-based supply chain software company, gained 6% in the week following its March 1 fourth quarter earnings announcement.

The positive results prompted several analyst to hike their target prices on KXS stock. And if you believe what analysts are writing about the company, investors can expect more share-price appreciation in the months ahead.

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Kinaxis delivered annual revenue in 2022 of $366.9 million (all figures in U.S. dollars unless noted otherwise), 46% higher than in 2021. If you exclude currency, sales rose 54% year-over-year. In addition, approximately $274 million was recurring revenue, 24% higher than a year ago.

Its remaining performance obligations (RPOs) at the end of December were $252.4 million in 2023, $187.9 million in 2024, and $158.0 million in 2025 and beyond, for a total of $598.3 million. At the end of 2020, its RPOs were less than $400 million.

Regarding profitability, its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $79.5 million in 2022, 99% higher than a year ago. Excluding currency, adjusted EBITDA rose 122%.

Conservative Outlook

The company’s outlook for 2023 includes revenue of $425 million at the midpoint of its guidance with adjusted EBITDA of $60 million, slightly lower than in 2022, likely taking into account a possible global economic slowdown in the second half of the year.

In its Q4 2022 conference call presentation, management highlighted that it currently has approximately 250-300 customers, with a target market of 19,000. It remains in its early growth stages despite a CAD $4.7 billion market cap.

Analysts Respond

Scotia Capital analyst Kevin Krishnaratne has a Sector Outperform rating on Kinaxis stock. The analyst increased his target price by CAD$22 to CAD$225, 33% higher than its current share price.

“Following 2022 results that featured accelerating ARR [annual recurring revenue] growth year-over-year ex. FX (26 per cent vs 21 per cent) and an impressive ‘Rule of 50′ operating profile (SaaS growth + EBITDA margin), we continue to have confidence in management and its vision of enabling supply chain resilience for businesses large and small,” The Globe and Mail reported the analyst's comments after the release of the company’s results.

Laurentian Bank Securities analyst Nick Agostino has a Buy rating on KXS shares with a $225 price target.

That analyst believes that the company’s plan to target smaller companies -- growing its total addressable market (TAM) by 12,000 potential customers to 19,000 -- while also focusing on additional new verticals such as energy will keep its accelerated growth intact in 2023 and beyond.


“The growing demand/pipeline, expected SaaS acceleration, expanded total addressable market, tightening sales cycle and accelerating momentum as depicted by KXS’s mid-term outlook are all factors that help reconfirm our thesis on KXS as a differentiated, IP-driven, disruptive player in the SC market and a must own for Canadian technology investors,” Agostino wrote in a note to clients.

Of the nine analysts that cover Kinaxis stock, seven have a Strong Buy rating, while two have a Moderate Buy, with an average rating of 4.88 out of 5.00.

According to Fintel data, the two exchange-traded funds with the largest weightings for Kinaxis are the Janus Henderson International Sustainable Equity ETF (US:SXUS), at 2.00%, and the WisdomTree Artificial Intelligence and Innovation Fund (US:WTAI) at 1.38%.

Article by Will Ashworth, Fintel