Q: I have held KXS and DSG long enough to be well up on both but wondering why KXS has been going sideways for so long while DSG does a nice steady climb.
Thank you
Thank you
5i Research Answer:
KXS has been moving sideways as its high P/E is still coming down to reasonable levels while its underlying business continues to grow. This sideways action usually means investors are not fully willing to sell it off yet as the business is still growing, but a bid up in its price would cause its multiple to expand to levels not consistent with other Canadian tech names. In this case, time is needed while the company's fundamentals 'grow into its multiples', and eventually it can break out of this range.
DSG, has the same valuation as KXS, but its margins have been expanding nicely, which is resulting in its price moving higher even while its valuation is contracting (its fundamentals are growing faster than its price appreciation).