Kinaxis (TSX:KXS) is continuing to underperform the broader market in 2024, as it currently trades with 11% year-to-date gains against the TSX Composite's 19% surge so far this year. With this, KXS stock currently trades with a market cap of $4.6 billion at $165.15 per share, around 29% below its all-time high posted three years ago.
However, does this underperformance mean investors should avoid Kinaxis stock? Not necessarily. In fact, for long-term investors, the recent drop in this supply chain management and operational planning software provider's share prices could be a great opportunity to buy right now. In this article, I'll break down two top reasons why now might be the perfect time to buy Kinaxis stock before it regains its momentum.
Stronger revenue growth and improving profit margins
Although the recent slowdown in global economic growth has affected many tech businesses, Kinaxis continues to deliver solid financial results. In its recently released third-quarter earnings report, the Ottawa-headquartered tech firm posted a 12.4% YoY (year-over-year) rise in revenue to US$121.5 million. More impressively, its SaaS (Software as a Service) revenue, which is the backbone of its recurring revenue model, jumped by 16% from a year ago, reflecting robust consumer demand for its supply chain solutions.
Notably, the company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also climbed by 31.6% YoY in the third quarter to US$30 million. Its adjusted EBITDA margin also expanded to 24.7% last quarter, up from 21.1% a year ago.
These encouraging margins also encouraged Kinaxis management to raise its profitability outlook for the third quarter in a row, highlighting its ability to balance revenue growth with cost management. Considering its focus on operational efficiency, Kinaxis could benefit from the surging demand for supply chain software globally, a market that is estimated to be worth US$16 billion.
Integrating AI to simplify its supply chain solutions
As handling supply chains becomes more complex, many large- and medium-sized businesses are looking to leverage artificial intelligence (AI) technology to take the lead. On this front, Kinaxis is doubling down on innovation, with AI at the heart of its strategy to simplify and streamline supply chain management.
Earlier in 2024, the company revealed that over 55% of its fast-growing patent portfolio is now dedicated to AI and machine learning (ML) innovations, underscoring its commitment to staying ahead of the curve.
The company's Maestro AI chat agent is a great example of its AI-powered solutions. With over 100 customers already onboard, Maestro AI supports businesses in tackling supply chain challenges by offering prescriptive recommendations, streamlining workflows, and speeding up decision-making. Similarly, Kinaxis recently launched its enterprise scheduling product, which a major global consumer products firm has already adopted.
As Kinaxis continues to focus on AI with a human-centred approach, it ensures that its solutions are not only innovative but also user-friendly and practical for the businesses it serves, further brightening its long-term growth outlook. Given these strong fundamentals, the recent weakness in Kinaxis stock could be a great opportunity for long-term investors to buy this top tech stock at a bargain now.
