Hong kong and connection concept; technology concept
Supply chain management should be on every smart investor’s radar right now. With market uncertainty and a rocky outlook for the global economy, knowing the source of materials and other key components of any potential stock is a must not only for investors, but also for clients and partners of businesses, who will need to get smart about supply chain operations as sourcing and procurement are about to become keenly-watched areas of every sector.
That’s why today’s top stock pick is a company that specializes in supply chain operation software. Kinaxis Inc. (TSX: KXS) does pretty much one thing, but it does it very well: their supply chain management software, RapidResponse, is getting a lot of coverage at the moment; it’s so well-diversified in terms of its client base that it deserves your attention if you’re looking at buying tech stock on the TSX.
One product, but an impressively broad customer base
RapidResponse is used by an impressive array of sectors, from aerospace and defence to tech and electronics, as well as industrial operations and the life sciences sector. And if that isn’t diversified enough for you, Kinaxis has sales operations in Canada, the U.S., Europe, and Asia.
If you want solidity, however, just look at the numbers. Its level of debt to net worth is less than 40%, and its payment of interest is less than its earnings through interest. In fact, in terms of debt (always a major indicator of a stock’s health), it has reduced its debt-to-net-worth from 107.2% to 7.4% in the last year alone.
If its stability looks good, wait until you see its growth forecast
Kinaxis is a high-growth stock with earnings set to increase at a rate of 20% per year. This represents significant growth in terms of earnings, making Kinaxis a moderate-to-strong buy in and of itself. Its revenue is also set to grow by 20% per year, and although this isn’t considered high growth for revenue, it’s still pretty good for a tech stock on the TSX.
Its one-year earnings growth is also solid, exceeding its five-year average by almost 60%. Consider that the Canadian software industry average for the past year was 9.3% and you’re looking at one of the breakaway stars of home-grown tech.
The bottom line
Although it’s not currently paying dividends, that’s not to say that it won’t in the future. The real benefit of holding Kinaxis stock is that you’ll be able to sell it for a profit as the company appreciates in value. It’s an innovative company that’s looking to incorporate artificial intelligence into its products, with a sales-focused management style spanning key international markets, offering an opportunity for expansion.
If high-growth stock is your thing, give Kinaxis a whirl. It’s set to exceed the Canadian market average in both earnings and revenue. It’s currently overvalued, but keep an eye on it and buy on the dip (look for a share price of $50 or less) for a nice little money spinner down the line.
