Globe - Monday's TSX Breakouts
Monday, July 10, 2017, 10:19:12 Monday’s TSX breakouts: Outperforming stock with 11 buy calls and a 23% gain forecast
Discussed today is a company whose share price has plunged 14 per cent over the past six weeks, and further downside may place the stock on the negative breakout list. The recent price weakness may represent a buying opportunity for growth investors to consider. The stock has 11 buy recommendations with a return of over 20 per cent forecast over the next year. The security highlighted below is Kinaxis Inc. (KXS-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Company
Ottawa-based Kinaxis is a cloud-based supply chain management software provider. In terms of geographical revenue breakdown, in the first quarter, 88 per cent of the company’s revenue was from North American based customer contracts, with the balance from Asia and European based contracts. Subscription revenue continues to grow, representing 73 per cent of total revenue, up from 68 per cent during the same period last year. Subscription revenue provides revenue predictability. In terms of customer concentration, during the first quarter, the top 10 customers accounted for approximately 49 per cent of total revenue, and one customer accounted for 12 per cent of total revenue.
After the market closed on May 3, the company reported better-than-expected first quarter financial results that sent the share price rising 2.9 per cent on high volume the following trading day. Over 480,000 shares traded on May 4, well above its three-month historical daily average trading volume of approximately 136,000 shares.
The company reported revenue of $32.5-million (U.S.) in the first quarter, relatively in-line with the consensus estimate of $32.7-million. Subscription revenue increased 29 per cent year-over-year to $23.9-million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $8.5-million (U.S.), slightly ahead of the Street’s forecast of $8.4-million. Adjusted EBITDA margins were 26 per cent and adjusted earnings per share came in at 23 cents (U.S.) beating the consensus estimate of 21 cents per share.
Also positive was management’s 2017 guidance. Total revenue was unchanged with expectations of between $140-million (U.S.) and $144-million (U.S.) reported. Annual subscription revenue is now expected to grow between 26 per cent and 28 per cent, up from management’s previous guidance of between 25 per cent and 27 per cent. Annual adjusted EBITDA margins are forecast to be between 25 per cent and 27 per cent, up from its previous guidance of between 24 per cent and 26 per cent.
During the earnings conference call, the president and chief executive officer, John Sicard, noted, “The majority of our booked subscription business in Q1 (the first quarter) were partner influenced. That's new. We're really thrilled about that. It tells us that we're on the right track. I can also say that all of our published partners have been engaged in Q1 activity. I've also noted in the past that we do have some large partners that I call -- they're in the incubation phase, if you will and you might expect to see some additional partners going public with Kinaxis in 2017 as a result. So we are working with the primary ones that you know about, Deloitte and Accenture for sure. There are others that we've engaged with that we're nurturing and maturing and stay tuned, you may hear some news in the rest of the year.”
The company is scheduled to release its second quarter financial results after the market closes on Aug. 3. The Street is expecting revenue of $35.2-million (U.S.), EBITDA of $9.2-million (U.S.) and earnings per share of 23 cents (U.S.).