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  5. KXS: KXS shares are basically flat over that past four years. [Kinaxis Inc.]
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Q: KXS shares are basically flat over that past four years. Yet the company continues to grow nicely quarter after quarter and the balance sheet is strong. So the fundamentals look really good. This would imply major valuation compression. Can you please comment on the valuation four years ago compared to today? How does the current valuation compare to their industry and software sector?

Thanks.
Asked by Joel on February 12, 2024
5i Research Answer:

KXS, at least, is up 7.8% this year, well ahead of the TSX. To be accurate, four years ago today it was $114, so is up a bit with its current $160 price. But it peaked at $229 in November 2021, so certainly has not been a huge winner. In 2020 P/E ranged from 73X to 228X, with an average of 140X. With covid, a better comparison year might be 2019, with the similar numbers 87X, 149X and 115X. EPS rose sharply in 2019, but then dipped in the pandemic year of 2020. Current forward P/E is 74X, so certainly still a premium price. EPS growth is expected at 25% this year, following very big growth in 2023 (full year earnings reported Feb 28). It has $80M more cash than in 2019 ($290M now). We think it needs to spend its cash and even lever up a bit with an acquisition. We think it is a great company, but investors seem bored with it. It is taking a long term business approach, but we do think it could be more aggressive. We note it has made money every year except 2021, and the stock is, at least, up more than 10-fold from its 2014 IPO ($13). It is still on the expensive side vs similar peers.