Q: Hi 5i,
I've owned Kinaxis (KXS) for a long time (2% of portfolio) but I'm considering selling it and buying Celistica (CLS). Could you please comment on the pros and cons of each stock and which one you would prefer at this time for a long term hold?
Thanks!
I've owned Kinaxis (KXS) for a long time (2% of portfolio) but I'm considering selling it and buying Celistica (CLS). Could you please comment on the pros and cons of each stock and which one you would prefer at this time for a long term hold?
Thanks!
5i Research Answer:
Both KXS and CLS are similar in size ($3B to $4B market caps), and both have similar net profit margin profiles (~3%), however, CLS does have a strong free cash flow yield, a more attractive valuation (11.7X forward earnings vs. KXS at 65X forward earnings), and its forward earnings growth is expected to be stronger than KXS. We like the momentum, valuation, and recent growth in CLS more than KXS, however, KXS has shown better revenue growth over a long period of time.
Overall, while we like both names, we would be comfortable with a switch from KXS to CLS here, while being mindful of position sizing, CLS' recent run, and small-cap risks.