Having run the numbers, over the last 20 half year periods the average EV/EBITDA for KNOS has been 22.2x, currently it's ~10.6x. Make of that what you will... |
74tom- the gist of you post is knos results are good but isn't the valuation high |
 I think the two declared notified short sellers have been caught out by yesterday's positive update. GLG in particular seem to have got overly aggressive post the November interims and increased their short from 0.85% to 1.29%, indeed it was as high as 1.7% in Jan.
It looks like they went above the notifiable threshold way back in May 2023, so that portion of their short is likely from the £12-14 level. Back then KNOS was valued at ~22x EV/Adjusted PBT, so I can certainly see the fundamental short case at those levels if they thought a slowdown was coming.
Now though? Based on yesterday's numbers and assuming £150m cash at year end, it's just over 10x EV/Adjusted PBT. If growth returns in any meaningful way then that valuation is way too cheap.
In many ways this reminds me of KWS; a fallen star that has temporarily gone ex growth but is still churning out huge FCF. Vulture short sellers have pushed it too far down and it's now fundamentally undervalued. Consequently, I think KNOS will be near the top of the PE wishlist and a bit at a >100% premium seems entirely possible.
Regardless, I think a re-rate back towards £10 is likely by the final results, especially as shares got to £12.80 last May... |
wealthoracle.co.uk/detailed-result-full/KNOS/1357 |
update sounds fair |
why thsee changes of musical chairs rns |
I mentioned £5 level because this is where the chart has some support.
Otherwise without decent news and improvements in the next TU, it could go lower.
It seems the whole UK corporate software sector is strugling, from Sage (SGE) to Computacentre (CCC) in the exception of Softcat (SCT).
So adding any negatives from updates in the sector will not help Kainos recover at all. |
I sold at a loss this morning. Like some have flagged there is probably more pain to come in terms of downgrades which will lead to P/e multiple contraction. |
re 74tom #2781: "EPS forecast was 46.3p, so 'moderately below ....'"
The TU refers to Revenue being moderately down: "revenues moderately below current market consensus ...." with a geared impact on earnings: "with the majority of the reduction flowing through to adjusted PBT." i.e. limited scope for cost savings within FY-25.
So, I am expecting eps (post share-based remuneration) to be in the range of 35~40p. |
To be frank I am very surprised by an early TU, just out of the blue !
The tone of the update coupled with a share buy back - to support EPS - means to me that they will be struggling during 2025.
So my conclusion is there is the possibility the share price will be heading towards £5 which will make a floor for recovery.
This could take some time though but the share price will struggle throughout.
So a downgrade is imminent and I am definitely out of this stock, regardless of my today losses. |
Used to park outside knos offices when I was going to classes in the Crescent Arts Centre |
Pretty pleased with my reading of this situation in early September in post 2768;
"Regarding the valuation, any company on 22x earnings which misses on revenue is going to come under pressure, as there is only so far that gross / operating margins can stretch before a top line downgrade results in an EPS miss."
So today we will get both a derating due to the EPS cut & also a multiple cut. EPS forecast was 46.3p, so 'moderately below' is likely 5-10%, let's say 7.5%, bringing it down to 43p, multiple was around 19x last night, so down to maybe 15x to account for potential further cuts between now and March 25, so new target price 650p or so? |
I haven't come across any explicitly negative sentiment about Kainos in the press or online. Most analyses I've seen have consistently recommended a 'HOLD' rating. Given the recent decline in the share price, and with the increased NHS spending outlined in the budget, there's a reasonable expectation for a recovery. I believe a fair value target near 9-10 is achievable. The next trading update will help as well. |
comments generally are tepid in the press and onlin-maybe you are too optimistic! |
An excellent budget for growth that will now benefit the likes of Kainos and many other sectors.
Now companies won't delay or cancel projects for hospitals and schools etc.
I am now a buyer of the likes of Kainos to hold for the long term as the economic environment and situation have completely changed from today as we move forward. |
Canaccord Genuity have raised recommendation from Hold to Speculative Buy |
thank you shared for sharing this -shame that the companyis is not marketing itself to retail investors |
That's unfortunate to hear. Despite market sentiment, I'm optimistic about Kainos' potential. With the new CEO in place for a year now and recent changes to the board, they've been strengthening leadership and laying the groundwork for future growth. I believe these should help form a positive long-term outlook. |
Chartwise, and with market sentiments, there isn't enough support. |
What's your view based on? |
With time, this is probably heading towards £5 support. |
Deutche Bank raises Kainos to BUY with a price target of 1185p |
Issue is the rating, high PER demanded growth.
Worth a look near £9 ?. |
yeah nyou could be right Tom. would certainly make sense. |
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