Intrinsic value of Kinaxis Inc. - KXS

Previous Close

$67.37

  Intrinsic Value

$19.99

stock screener

  Rating & Target

str. sell

-70%

Previous close

$67.37

 
Intrinsic value

$19.99

 
Up/down potential

-70%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of KXS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.64
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
Revenue, $m
  157
  177
  198
  221
  244
  269
  295
  322
  350
  379
  410
  441
  474
  508
  544
  581
  619
  659
  701
  744
  789
  836
  885
  936
  989
  1,045
  1,103
  1,164
  1,227
  1,293
  1,363
Variable operating expenses, $m
 
  131
  147
  163
  181
  199
  218
  238
  259
  280
  303
  326
  351
  376
  402
  429
  458
  487
  518
  550
  583
  618
  654
  692
  731
  772
  815
  860
  907
  956
  1,007
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  132
  131
  147
  163
  181
  199
  218
  238
  259
  280
  303
  326
  351
  376
  402
  429
  458
  487
  518
  550
  583
  618
  654
  692
  731
  772
  815
  860
  907
  956
  1,007
Operating income, $m
  24
  46
  52
  58
  64
  70
  77
  84
  91
  99
  107
  115
  124
  133
  142
  152
  162
  172
  183
  194
  206
  218
  231
  244
  258
  273
  288
  304
  320
  338
  356
EBITDA, $m
  27
  49
  55
  61
  68
  75
  82
  89
  97
  105
  114
  122
  131
  141
  151
  161
  172
  183
  194
  206
  219
  232
  245
  259
  274
  289
  305
  322
  340
  358
  377
Interest expense (income), $m
  0
  0
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
Earnings before tax, $m
  24
  46
  54
  59
  65
  71
  78
  85
  92
  99
  107
  115
  123
  131
  140
  150
  159
  169
  180
  190
  202
  213
  226
  238
  252
  266
  280
  296
  311
  328
  345
Tax expense, $m
  9
  12
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  46
  48
  51
  54
  58
  61
  64
  68
  72
  76
  80
  84
  89
  93
Net income, $m
  15
  34
  39
  43
  48
  52
  57
  62
  67
  72
  78
  84
  90
  96
  102
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  227
  239
  252

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  173
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  227
  61
  68
  76
  84
  93
  101
  111
  120
  131
  141
  152
  163
  175
  187
  200
  213
  227
  241
  256
  271
  288
  304
  322
  340
  359
  379
  400
  422
  445
  469
Adjusted assets (=assets-cash), $m
  54
  61
  68
  76
  84
  93
  101
  111
  120
  131
  141
  152
  163
  175
  187
  200
  213
  227
  241
  256
  271
  288
  304
  322
  340
  359
  379
  400
  422
  445
  469
Revenue / Adjusted assets
  2.907
  2.902
  2.912
  2.908
  2.905
  2.892
  2.921
  2.901
  2.917
  2.893
  2.908
  2.901
  2.908
  2.903
  2.909
  2.905
  2.906
  2.903
  2.909
  2.906
  2.911
  2.903
  2.911
  2.907
  2.909
  2.911
  2.910
  2.910
  2.908
  2.906
  2.906
Average production assets, $m
  13
  14
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
  46
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  103
  109
Working capital, $m
  124
  -55
  -62
  -69
  -76
  -84
  -92
  -100
  -109
  -118
  -128
  -138
  -148
  -159
  -170
  -181
  -193
  -206
  -219
  -232
  -246
  -261
  -276
  -292
  -309
  -326
  -344
  -363
  -383
  -404
  -425
Total debt, $m
  0
  -53
  -47
  -40
  -32
  -25
  -17
  -8
  0
  9
  19
  29
  39
  49
  60
  72
  84
  96
  109
  122
  136
  151
  166
  182
  198
  215
  233
  252
  272
  292
  314
Total liabilities, $m
  109
  55
  61
  68
  76
  83
  91
  100
  108
  117
  127
  137
  147
  157
  168
  180
  192
  204
  217
  230
  244
  259
  274
  290
  306
  323
  341
  360
  380
  400
  422
Total equity, $m
  119
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
Total liabilities and equity, $m
  228
  61
  68
  76
  84
  92
  101
  111
  120
  130
  141
  152
  163
  174
  187
  200
  213
  227
  241
  256
  271
  288
  304
  322
  340
  359
  379
  400
  422
  444
  469
Debt-to-equity ratio
  0.000
  -8.730
  -6.830
  -5.220
  -3.840
  -2.660
  -1.640
  -0.750
  0.030
  0.720
  1.340
  1.890
  2.380
  2.830
  3.230
  3.600
  3.930
  4.240
  4.520
  4.780
  5.020
  5.240
  5.450
  5.650
  5.830
  6.000
  6.150
  6.300
  6.440
  6.570
  6.700
Adjusted equity ratio
  -1.000
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  34
  39
  43
  48
  52
  57
  62
  67
  72
  78
  84
  90
  96
  102
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  227
  239
  252
Depreciation, amort., depletion, $m
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  44
  37
  42
  47
  51
  56
  62
  67
  73
  78
  84
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
  169
  179
  189
  200
  211
  222
  234
  247
  260
  274
Change in working capital, $m
  2
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
Cash from operations, $m
  42
  43
  49
  54
  59
  64
  70
  75
  81
  87
  94
  101
  107
  115
  122
  130
  138
  146
  155
  164
  174
  184
  194
  205
  216
  228
  240
  253
  267
  281
  296
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -8
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  -8
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
Free cash flow, $m
  34
  39
  44
  49
  53
  58
  63
  68
  74
  80
  85
  91
  98
  104
  111
  118
  126
  133
  141
  150
  158
  167
  177
  187
  197
  208
  219
  231
  243
  256
  269
Issuance/(repayment) of debt, $m
  0
  -53
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  21
Issuance/(repurchase) of shares, $m
  4
  26
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4
  -27
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  21
Total cash flow (excl. dividends), $m
  39
  12
  51
  56
  61
  66
  71
  77
  83
  89
  95
  101
  108
  115
  122
  130
  138
  146
  154
  163
  172
  182
  192
  203
  214
  225
  237
  250
  263
  276
  291
Retained Cash Flow (-), $m
  -30
  -60
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Prev. year cash balance distribution, $m
 
  173
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  125
  50
  55
  60
  65
  70
  76
  82
  88
  94
  100
  107
  114
  121
  128
  136
  144
  153
  162
  171
  180
  190
  201
  212
  223
  235
  247
  261
  274
  289
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  120
  46
  48
  49
  50
  51
  51
  51
  50
  49
  48
  46
  43
  41
  38
  35
  31
  28
  25
  22
  19
  16
  13
  11
  9
  7
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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Kinaxis Inc. is a provider of cloud-based subscription software for supply chain operations. The Company offers RapidResponse as a collection of cloud-based configurable applications. The Company's RapidResponse product provides supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected supply chain management processes, including demand planning, supply planning, inventory management, order fulfillment and capacity planning. The Company's customers include companies in various industries, including high technology and electronics; aerospace and defense; life sciences and pharmaceuticals; industrial, and automotive. Its sales and operations planning solutions include demand planning, aggregate supply planning, capacity planning (constraints), inventory planning and optimization, and inventory management. The Company's supply chain management applications include capacity planning, order fulfillment and supplier collaboration.

FINANCIAL RATIOS  of  Kinaxis Inc. (KXS)

Valuation Ratios
P/E Ratio 112
Price to Sales 10.7
Price to Book 14.1
Price to Tangible Book
Price to Cash Flow 40
Price to Free Cash Flow 49.4
Growth Rates
Sales Growth Rate 27.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 14.4%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 68.8%
Gross Margin - 3 Yr. Avg. 70.6%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 15.9%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 15.3%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 60.9%
Payout Ratio 0%

KXS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KXS stock intrinsic value calculation we used $157 million for the last fiscal year's total revenue generated by Kinaxis Inc.. The default revenue input number comes from 2016 income statement of Kinaxis Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KXS stock valuation model: a) initial revenue growth rate of 12.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for KXS is calculated based on our internal credit rating of Kinaxis Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kinaxis Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KXS stock the variable cost ratio is equal to 73.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KXS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Kinaxis Inc..

Corporate tax rate of 27% is the nominal tax rate for Kinaxis Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KXS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KXS are equal to 8%.

Life of production assets of 4.2 years is the average useful life of capital assets used in Kinaxis Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KXS is equal to -31.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $119 million for Kinaxis Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 25.374 million for Kinaxis Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kinaxis Inc. at the current share price and the inputted number of shares is $1.7 billion.

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The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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