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  5. KXS: I'm reviewing KXS today as it is a part of my portfolio. [Kinaxis Inc.]
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Q: I'm reviewing KXS today as it is a part of my portfolio. The feeling I've had in the last year, and stronger after looking today, is that KXS is a moderate revenue grower (up to 20% year over year recently and forecasted), but still valued comparible to high-fliers growing at 50+%. Based on the forecasted revenue growth, is the 20x sales multiple justified? It seems like a solid company and no debt issues, so this is simply a question on valuation. PEG is also very high. What am I missing, given that you know the company better than I, and the market right now is obviously seeing value that I'm not. I'd like to make a decision on this one before the next earnings come out in August.

Asked by Kel on July 30, 2021
5i Research Answer:

KXS is not cheap, but is cheaper than some. It has not issued shares since its IPO, and shares have done exceptionally well since being issued at $13 seven years ago. Investors like the balance sheet and potential. KXS signs smalll initial contracts with global companies, and these often turn into very large contracts across whole organizations. Following covid and supply chain disruptions, its solutions have become more in demand. Still, the stock has not done so well as it has a mixed history of meeting estimates. This, however, is largely due to the nature of its business. One large contract won, lost, or delayed can have a material impact to results. Insiders have been buying this year, and despite the valuation it is not one that we particularly worry about. If offers a good, needed solution to clients.