Intrinsic value of Kinaxis Inc. - KXS

Previous Close

$70.22

  Intrinsic Value

$28.40

stock screener

  Rating & Target

str. sell

-60%

  Value-price divergence*

+34%

Previous close

$70.22

 
Intrinsic value

$28.40

 
Up/down potential

-60%

 
Rating

str. sell

 
Value-price divergence*

+34%

*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 1.8

 

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
  18.90
  17.51
  16.26
  15.13
  14.12
  13.21
  12.39
  11.65
  10.98
  10.39
  9.85
  9.36
  8.93
  8.53
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
Revenue, $m
  157
  187
  219
  255
  294
  335
  379
  426
  476
  528
  583
  641
  701
  763
  828
  896
  966
  1,040
  1,116
  1,195
  1,277
  1,362
  1,451
  1,543
  1,640
  1,740
  1,844
  1,953
  2,066
  2,185
  2,308
Variable operating expenses, $m
 
  138
  162
  188
  217
  248
  280
  315
  352
  390
  431
  473
  518
  564
  612
  662
  714
  768
  824
  883
  944
  1,007
  1,072
  1,141
  1,212
  1,286
  1,363
  1,443
  1,527
  1,615
  1,706
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
  138
  162
  188
  217
  248
  280
  315
  352
  390
  431
  473
  518
  564
  612
  662
  714
  768
  824
  883
  944
  1,007
  1,072
  1,141
  1,212
  1,286
  1,363
  1,443
  1,527
  1,615
  1,706
Operating income, $m
  24
  49
  57
  67
  77
  87
  99
  111
  124
  138
  152
  167
  183
  199
  216
  234
  252
  271
  291
  312
  333
  356
  379
  403
  428
  454
  481
  510
  539
  570
  602
EBITDA, $m
  27
  52
  61
  71
  81
  93
  105
  118
  132
  146
  162
  177
  194
  211
  229
  248
  268
  288
  309
  331
  354
  377
  402
  428
  454
  482
  511
  541
  572
  605
  639
Interest expense (income), $m
  0
  0
  -2
  -1
  -1
  -1
  0
  0
  1
  1
  2
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
Earnings before tax, $m
  24
  49
  59
  68
  78
  88
  99
  111
  123
  136
  150
  165
  180
  195
  212
  229
  246
  265
  284
  303
  324
  345
  368
  391
  415
  440
  466
  494
  522
  552
  583
Tax expense, $m
  9
  13
  16
  18
  21
  24
  27
  30
  33
  37
  41
  44
  49
  53
  57
  62
  66
  71
  77
  82
  88
  93
  99
  106
  112
  119
  126
  133
  141
  149
  157
Net income, $m
  15
  36
  43
  50
  57
  64
  72
  81
  90
  100
  110
  120
  131
  143
  155
  167
  180
  193
  207
  222
  237
  252
  268
  285
  303
  321
  340
  360
  381
  403
  425

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
  64
  75
  88
  101
  115
  130
  147
  164
  182
  201
  220
  241
  262
  285
  308
  332
  358
  384
  411
  439
  469
  499
  531
  564
  598
  634
  672
  711
  752
  794
Adjusted assets (=assets-cash), $m
  54
  64
  75
  88
  101
  115
  130
  147
  164
  182
  201
  220
  241
  262
  285
  308
  332
  358
  384
  411
  439
  469
  499
  531
  564
  598
  634
  672
  711
  752
  794
Revenue / Adjusted assets
  2.907
  2.922
  2.920
  2.898
  2.911
  2.913
  2.915
  2.898
  2.902
  2.901
  2.900
  2.914
  2.909
  2.912
  2.905
  2.909
  2.910
  2.905
  2.906
  2.908
  2.909
  2.904
  2.908
  2.906
  2.908
  2.910
  2.909
  2.906
  2.906
  2.906
  2.907
Average production assets, $m
  13
  15
  18
  20
  23
  27
  30
  34
  38
  42
  47
  51
  56
  61
  66
  72
  77
  83
  89
  96
  102
  109
  116
  123
  131
  139
  148
  156
  165
  175
  185
Working capital, $m
  124
  -58
  -68
  -80
  -92
  -105
  -118
  -133
  -149
  -165
  -182
  -200
  -219
  -238
  -258
  -280
  -301
  -324
  -348
  -373
  -398
  -425
  -453
  -482
  -512
  -543
  -575
  -609
  -645
  -682
  -720
Total debt, $m
  0
  -50
  -40
  -29
  -17
  -4
  9
  24
  39
  56
  73
  90
  109
  128
  148
  169
  191
  214
  237
  262
  287
  314
  341
  370
  400
  431
  463
  497
  532
  568
  607
Total liabilities, $m
  109
  58
  68
  79
  91
  104
  117
  132
  147
  164
  181
  198
  217
  236
  256
  277
  299
  322
  345
  370
  395
  422
  449
  478
  508
  539
  571
  605
  640
  676
  715
Total equity, $m
  119
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
Total liabilities and equity, $m
  228
  64
  76
  88
  101
  116
  130
  147
  163
  182
  201
  220
  241
  262
  284
  308
  332
  358
  383
  411
  439
  469
  499
  531
  564
  599
  634
  672
  711
  751
  794
Debt-to-equity ratio
  0.000
  -7.820
  -5.310
  -3.310
  -1.690
  -0.370
  0.720
  1.640
  2.400
  3.060
  3.620
  4.100
  4.520
  4.890
  5.210
  5.500
  5.750
  5.980
  6.190
  6.370
  6.540
  6.700
  6.840
  6.970
  7.090
  7.200
  7.300
  7.390
  7.480
  7.560
  7.640
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
  36
  43
  50
  57
  64
  72
  81
  90
  100
  110
  120
  131
  143
  155
  167
  180
  193
  207
  222
  237
  252
  268
  285
  303
  321
  340
  360
  381
  403
  425
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
Funds from operations, $m
  44
  39
  47
  54
  61
  70
  78
  88
  98
  108
  119
  130
  142
  155
  168
  181
  195
  210
  225
  241
  257
  274
  292
  310
  329
  349
  370
  392
  414
  438
  462
Change in working capital, $m
  2
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
Cash from operations, $m
  42
  48
  57
  65
  73
  83
  92
  102
  113
  124
  136
  148
  161
  174
  188
  202
  217
  233
  249
  265
  283
  301
  319
  339
  359
  380
  402
  425
  449
  475
  501
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
New CAPEX, $m
  -8
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
Cash from investing activities, $m
  -8
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -33
  -34
  -36
  -39
  -40
  -42
  -45
Free cash flow, $m
  34
  43
  51
  58
  66
  75
  83
  93
  102
  113
  123
  134
  146
  158
  171
  184
  197
  211
  226
  241
  257
  273
  290
  308
  327
  346
  366
  387
  409
  432
  456
Issuance/(repayment) of debt, $m
  0
  -50
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  37
  38
Issuance/(repurchase) of shares, $m
  4
  25
  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
  -25
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  37
  38
Total cash flow (excl. dividends), $m
  39
  18
  61
  70
  78
  87
  97
  107
  118
  129
  140
  152
  165
  177
  191
  205
  219
  234
  250
  266
  282
  300
  318
  337
  357
  377
  399
  421
  444
  469
  494
Retained Cash Flow (-), $m
  -30
  -60
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
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
 
  130
  60
  68
  77
  86
  96
  106
  116
  127
  138
  150
  163
  175
  189
  202
  217
  231
  247
  263
  280
  297
  315
  334
  353
  374
  395
  417
  440
  465
  490
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
 
  125
  55
  59
  63
  67
  69
  71
  73
  73
  73
  71
  69
  67
  63
  59
  55
  50
  45
  40
  36
  31
  26
  22
  18
  15
  12
  9
  7
  5
  4
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
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Kinaxis Inc. provides cloud-based software for supply chain operations. The company offers RapidResponse, which provides supply chain planning and analytics capabilities for managing various supply chain management processes, including demand planning, supply planning, inventory management, order fulfillment, capacity planning, master scheduling, and sales and operations planning. It also offers professional services, such as implementation, technical, and training services, as well as maintenance and support services to its software products. The company serves enterprises operating in various industries, including high technology and electronics manufacturing, aerospace and defense, industrial products, life sciences and pharmaceuticals, and consumer packaged goods, as well as the automotive sector. Kinaxis Inc. sells its products in the United States, Canada, Europe, Japan, and internationally through direct sales channels, as well as through resellers and other partners. The company was formerly known as webPLAN Inc. and changed its name to Kinaxis Inc. in May 2005. Kinaxis Inc. was founded in 1984 and is headquartered in Ottawa, Canada.

FINANCIAL RATIOS  of  Kinaxis Inc. (KXS)

Valuation Ratios
P/E Ratio 116.8
Price to Sales 11.2
Price to Book 14.7
Price to Tangible Book
Price to Cash Flow 41.7
Price to Free Cash Flow 51.5
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 18.9% 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 25.349 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 $1.8 billion.

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Stock chart of KXS Financial statements of KXS
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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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