The stock chart for Ottawa-based Kinaxis Inc. (KXS-T), a cloud-based supply chain management software provider, looks attractive from a technical perspective as it has recently exhibited a bullish "Golden Cross" formation.
A "Golden Cross" is a potentially bullish technical signal that occurs when a short-term moving average, such as the 50-day moving average, crosses above a longer-term moving average, such as the 200-day moving average. When this occurs, it marks a potentially positive signal suggesting the upward price momentum may continue.
Some traders suggest waiting until the 50-day moving average crosses above the 200-day moving average by a certain percentage, such as 3 per cent, to confirm the bullish signal.
The last time Kinaxis stock had a golden cross pattern was in May 2016. At that point, the stock price was just above the $49 level. One year later, in May 2017, the share price peaked to a record closing high of $90.97.
Looking at key support and resistance levels, there is strong technical support around $78, near its 50-day moving average (at $78.19) and its 200-day moving average (at $77.47). In fact, during last week's market sell-off, the share price held above $78, closing at $78.03 on Friday Feb. 9.
In terms of upside resistance, the share price has an initial ceiling of resistance around $85. If the stock price were to break above this level, the share price could rally back up to $90.
From a fundamental perspective, analysts are positive on the stock.
There are 12 buy recommendation and two hold recommendation. Price targets range from a low of $75 (from the analyst at Canaccord Genuity) to a high of $100 (from the analyst at National Bank Financial). The average one-year target price is $87.30, and half of the analysts covering the company have target prices of $90 or higher.
Earnings forecasts have been edging higher. The consensus earnings per share estimates are $1.07 for 2017, $1.21 for 2018, and $1.51 for 2019. Looking back four months, the Street was forecasting earnings per share of 99 cents for 2017 and $1.18 for 2018.
According to Bloomberg, the stock is trading at an enterprise value-to-sales multiple of 9.5 times the 2018 consensus estimate, off from its peak multiple of approximately 11 times.
The company will be reporting its fourth-quarter financial results after the market closes on Feb. 28. The Street is expecting revenue of $34.6-million, EBITDA of $9-million and earnings per share of 23 cents. The company reports its financial results in U.S. dollars.
This report is based on technical analysis. Technical analysis does not replace fundamental analysis, but can help identify companies worth having a closer look at.