ALERT: 1 Value Stock to Buy

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Kinaxis (TSX:KXS) is a leading provider of cloud-based subscription software that enables the company’s customers to improve and accelerate analysis and decision-making. The company’s supply chain planning and analytics capabilities of Kinaxis’s RapidResponse, creates the foundation for managing multiple, interconnected supply chain management processes.

Business strategy

Kinaxis revolutionizes supply chain planning by enabling the company’s customers to plan concurrently. The company helps maximize business performance by solving complex business problems in easy-to-understand ways by combining human and machine intelligence to plan and monitor risks and opportunities. The company provides a unique technique called concurrent planning to collapse decision cycle times by connecting a broad array of supply chain business problems within a single product, thus delivering a consolidated view of the entire supply chain.

The company greatly reduces decision latency and risk for customers, leading to improved operational and financial performance, such as lower working capital, increased asset efficiency, improved customer service, and increased profitability. RapidResponse is the company’s software that is delivered to the majority of the Kinaxis’s customers as a cloud-based service.

Product development

The product’s ease of use and ability to expand business applications over time has resulted in a loyal user base, ongoing penetration within the customer’s organization, and increasing business value over time. Kinaxis sells product primarily in North America, Western Europe, and select countries in Asia through direct sales channels and through relationships with partners and resellers.

The company focuses on large, global enterprises operating in a broad range of key industries characterized by complex networks including high technology and electronics manufacturing, aerospace and defence, industrial products, life sciences and pharmaceuticals, automotive, and consumer products.

Recent developments affecting the global economy, including trade and tariff disputes, Brexit, and outbreaks of illness, have introduced numerous disruptions to global supply chains. In addition, the threats posed by climate change have caused businesses to place increasing focus on the sustainability of operations.

Diversified customer base

Kinaxis’s revenues are well diversified, with no concentration in any one particular customer. No individual customer accounts for greater than 10% of the company’s revenue. The majority of the company’s customers tend to select RapidResponse to holistically address an end-to-end supply chain planning requirement.

The company primarily targets companies that have over $1 billion in revenue, though Kinaxis does have some customers outside these parametres. Kinaxis’s subscription sales are based on a monthly subscription fee, which is typically prepaid on an annual basis.

The company’s subscription agreements usually have a fixed term of three to five years. This results in a fairly smooth revenue curve with a forward backlog that is significantly more than yearly revenues. The company typically enter into organization-wide subscription agreements with customers, with pricing based on the number of end users in the customer’s organization and the number of applications, sites, and environments requested by the customer.

In short, Kinaxis’s planning applications are uniquely positioned to manage uncertainty by proactively monitoring and rapidly responding to unanticipated adverse developments and to strategically transform processes to address existing and future challenges.

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Fool contributor Nikhil Kumar has no position in any of the stocks mentioned. The Motley Fool recommends KINAXIS INC.

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