Kinaxis vs. Descartes: Which Is the Better Tech Stock to Buy?

Top tech stocks like Kinaxis Inc. (TSX:KXS) and Descartes Systems Group Inc. (TSX:DSG)(NASDAQ:DSGX) are worth your attention right now.

| More on:

The COVID-19 pandemic disrupted many major industries to kick off this decade. It also had an impact on broader systems that tie our economic and social lives together. Global supply chains suffered major disruptions due to the pandemic, and some of those wounds are still festering. Today, I want to look at two top Canadian tech stocks that have set out to revolutionize this space: Kinaxis (TSX:KXS) and Descartes (TSX:DSG)(NASDAQ:DSGX). Which tech stock is the better buy in the second half of May? Let’s jump in.

Why I’m targeting the supply chain software space in 2022

A supply chain is a system within an organization that facilitates the production and/or delivery of a product or service. Canadian consumers have likely already experienced issues that were related to the ongoing supply chain crisis this decade. For example, back in October 2021, supply chain issues at the U.S.-Canada border meant that items like chicken, coffee, and toilet paper may have been more difficult to obtain.

In the United States, the baby formula shortage has also illustrated how dire the consequences of this supply chain crisis can be. This has left parents and caregivers scrambling.

Canada has grown into a leader in providing supply chain software solutions on the back of several top companies. These ongoing problems should keep investors interested in this space. Earlier this year, market researcher Technavio projected that the global supply chain management software market would deliver a strong CAGR of 11% over the forecast period from 2020 through to 2025.

The case for Kinaxis as the top tech stock in this space

Kinaxis is an Ottawa-based company that provides cloud-based subscription software for supply chain operations to a worldwide client base. This tech stock managed to defy a violent bear market during the March 2020 correction. Its shares have dropped 17% in 2022 as of close on May 17.

The company released its first-quarter 2022 earnings on May 5. It delivered total revenue growth of 70% to $98.1 million. Meanwhile, gross profit jumped 87% to $69.6 million. Better yet, adjusted EBITDA soared 267% to $33.1 million. Kinaxis has continued to post promising new customer wins, which should drive growth for the rest of this fiscal year.

Is Descartes the better tech stock to own right now?

Descartes is a Waterloo-based company that provides cloud-based logistics and supply chain management business process solutions focused on improving efficiency for its clients. This tech stock is down 20% so far in 2022. Its shares are still up 11% in the year-over-year period. I’d suggested investors snatch up this tech stock back in November 2021.

Investors can expect to see Descartes’s first batch of fiscal 2023 earnings on June 1. In fiscal 2022, the company reported total revenues of $424 million — up from $348 million in the previous year. Meanwhile, adjusted EBITDA rose to $185 million compared to $142 million in the first quarter of fiscal 2021.

Verdict

Both companies currently boast very strong balance sheets. These stocks are trading in favourable value territory compared to their peers in the tech space at the time of this writing. This is a very close call, but I’d look to snatch up Descartes due to its value and the momentum it has built ahead of its next earnings release.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has positions in KINAXIS INC. The Motley Fool recommends KINAXIS INC.

More on Tech Stocks

ways to boost income
Tech Stocks

2 Stocks to Help Turn $100,000 Into $1 Million

Do you want to turn $100,000 into $1 million quickly? Look for small- or mid-cap stocks that are scaling as…

Read more »

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

telehealth stocks
Tech Stocks

Well Health Stock: Buy, Sell, or Hold?

Another record-breaking quarter and strong demand sets the stage for continued momentum for Well Health stock.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

profit rises over time
Tech Stocks

2 Non-AI Tech Stocks to Buy in November for Better Returns

Not all AI stocks are riding the hype train, and for many investors, well-understood and predictable growth stocks might be…

Read more »

worry concern
Tech Stocks

In a Few Years, You’ll Probably Regret Not Owning BlackBerry Stock

Here’s why I believe BlackBerry could be one of the most overlooked Canadian tech stocks right now.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

Is Constellation Software Stock a Buy for its 0.25% Dividend Yield?

Here's what investors may want to consider when it comes to Dollarama (TSX:DOL) and its relatively low dividend yield.

Read more »