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  5. KXS: So KXS dropped $22, over 14%, and 5i has answered a few questions with general replies. [Kinaxis Inc.]
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Q: So KXS dropped $22, over 14%, and 5i has answered a few questions with general replies. Can you please use your expertise and provide an assessment of what you think the stock will do going forward? In your view, was the CEO pushed out? Was the sales person pushed out? What change in direction do you forsee? It's in the growth portfolio. Does it warrant still being there? It's been an under-achiever for some time and 5i says it needs to deploy some of its cash and expand. How long do you wait for this to happen?
Asked on August 29, 2024
5i Research Answer:

The stock in general has been volatile with flat price action over the past few years. It has been a sharp drop since the earnings results, but zooming out over the past few years, it is not outside of the norm of recent history for this name. 

As mentioned in earlier comments, the executive transition has been quick and perhaps indicates that the company is attempting to shift to a larger global type of name, which would demand a different set of skills and leadership.  

One of the main issues in this name is its high valuation. Price has been flat for years while fundamentals have grown, and its valuation has contracted from 97X forward P/E in FY2020 to 37X today. 

The price has been consolidating since 2020, and if we see its price drop much below $120, we would have to reevaluate the company's outlook and potential, but for now it is merely trading sideways while fundamentals grow into its high multiples. 

We think eventually the name can break out of this range as its fundamentals continue to expand and grow, but investor patience will be required.