Tuesday’s TSX breakouts: 7 ‘buy’ ratings for this top performing stock

There are 25 stocks on the positive breakouts list, outnumbering the number of stocks on the negative breakouts list, which stands at 20. A positive observation is the wide representation of sectors represented on the positive breakouts list. For an uptrend to have continued strength and momentum, generally, you want to see leadership across a number of sectors, not just concentrated in one or two sectors – so this is a positive sign for equity markets.

Discussed today is a technology stock, Kinaxis Inc. (KXS-T). This Ottawa-based company is a provider of cloud-based subscription software that assists its customers in supply chain planning and decision making. Among Kinaxis' customers are well-known companies such as Ford, Toshiba, Cisco, Qualcomm, Honeywell, and Jabil. Subscription software provides the company with revenue visibility.

On Oct. 28, the company reported third-quarter results ahead of the Street's expectations, reporting adjusted earnings per share of 20 cents (U.S.), beating the consensus estimate of 16 cents. Revenue for the quarter was $23.7-million, up 34 per cent year-over-year. Subscription revenue increased 24 per cent year-over-year to $16.5-million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $8-million, jumping 53 per cent year-over-year, exceeding the Street's expectation of $6-million. The positive earnings surprise sent the stock price higher by 7 per cent.

Management re-affirmed its guidance for subscription growth in 2015, anticipating growth of between 26 per cent to 28 per cent. Another positive was that management raised its annual adjusted EBITDA guidance, now expecting it to fall between 28 per cent to 32 per cent of total revenue.

Analysts' recommendations

According to Bloomberg, there are seven analysts with "buy" recommendations. There are no "hold" recommendations, nor any "sell" recommendations. Price targets range from $50 to $55, with the average one-year price target at $52.07, implying a potential price return of 12 per cent.

The consensus earnings per share estimate is 73 cents (U.S) in 2015; however, rising just 4 per cent to 76 cents in 2016.

Dividend policy

The company does not pay shareholders a dividend.

Technical analysis

Year-to-date, the stock price has appreciated 152 per cent, outperforming all stocks in the S&P/TSX composite index. As a result of the price appreciation, the stock's market capitalization recently crossed the $1-billion mark, and is currently at $1.1-billion. This may put the stock on the radar screen of additional investors and analysts.

There is limited data on this stock since it was just listed on the Toronto Stock Exchange in 2014. Since its initial public offering at $13 a share, the stock price has appreciated 259 per cent.

The relatively strength index is at 66, implying the shares are nearing an overbought level. Generally, a reading at or above 70 indicates an overbought condition.

The stock price remains in an uptrend with both its 50-day and 200-day moving averages upward sloping and the stock price trading above both of these moving average – all bullish signs.

There is downside support around $43.50, failing that around $42.50, near the stock's 50-day moving average of $42.44.

As always, I strongly encourage readers to consult a financial advisor, and to do their own proper due diligence before taking any investment action.

Below is a list of stocks in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows.