The TSX isn’t known for an abundance of high-flying tech stocks.
Sure, there’s Shopify, and the little-known (but extremely successful) Constellation Software. These stocks have delivered superior returns to investors year after year, beating the NASDAQ by a wide margin. But apart from them and a handful of others, there aren’t a whole lot to mention.
With the tech industry being headquartered in the Bay Area, most of the top tech stocks are listed on the NASDAQ or NYSE — and that’s not changing any time soon.
That doesn’t mean you can’t find the odd TSX tech stock that outperforms, however. Every once in a while, an “under-the-radar” Canadian tech company comes along that takes the markets by storm. Shopify, for example, was once flying so high that Jim Cramer suggested that FAANG should be changed to “FAANGS” to reflect its inclusion in the club. That’s not the only example either. In this article, I’ll talk about a top TSX tech stock that went up 28% in under a month and is leading the charge in the AI revolution.
Kinaxis (TSX:KXS) is a supply chain management software company based in Ottawa. It provides long-term contracts to major companies that are paid on a monthly basis — usually on two-year renewal periods.
This provides the company with steady, long-term, recurring income.
The sheer size of the company’s customers also provides a healthy dose of income. Kinaxis’s clients include heavy hitters like Ford, Cisco, and Qualcomm — industry giants that can singlehandedly drive enormous amounts of revenue. Any time Kinaxis signs up another client of that calibre, it’s another two years of recurring revenue. So, it should come as no surprise that KXS produced a massive earnings beat last quarter.
Why it’s up this past 30 days
In its third-quarter report, released November 1, Kinaxis posted massively improved metrics across the board, which helped send its shares up 28% in less than 30 days.
Revenue came in at $47 million — up 29% year over year.
Gross profit came in at $33 million — up 36% year over year.
Adjusted EBITDA was $12 million — up 29% year over year.
These are excellent growth metrics. In the quarter, the company increased its subscription revenue, while having an excellent gross margin. One sour point was cash from operating activities, which decreased 41%, although the company claimed that was due to short-term fluctuations.
How its AI could change the game
One factor that could take KXS even higher is AI.
AI is the “new gold rush” in the tech industry — a new concept that promises to automate and improve business processes over time. With self-learning AI, businesses can realize efficiency improvements without any need for human input. The possible gains are substantial, and all the tech giants are investing in it.
Kinaxis is presently investing in AI solutions for supply chain management. According to a recent blog post by the company, the applications it’s working on are automated planning, predictive customer service, and anticipating supply chain disruptions. These are valuable software functions that currently can’t be managed without human involvement. If Kinaxis leads the way in automating these functions, it could lead to increased demand for its products. That, in turn, could send its shares even higher.
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Fool contributor Andrew Button has no position in any of the stocks mentioned. David Gardner owns shares of Ford. Tom Gardner owns shares of Qualcomm and Shopify. The Motley Fool owns shares of and recommends Constellation Software, Shopify, and Shopify. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends KINAXIS INC.