Analyst Note| Dan Romanoff, CPA |
Narrow-moat Descartes delivered strong results, with revenue and adjusted EBITDA nicely ahead of both FactSet consensus and previous guidance. We view Descartes as well-positioned emerging from the pandemic, capitalizing on increased reliance on customs and compliance solutions amidst Brexit, a global pandemic-accelerated shift to e-commerce, and the transportation intricacies involved in vaccine distributions. Accordingly, management issued a positive outlook for 2022, providing baseline calibration--metrics akin to guidance assuming no new business signings--that seemed appropriate considering the tailwinds benefiting Descartes as transportation networks recover. On March 1, Descartes acquired QuestaWeb, a provider of foreign trade zone and customs compliance solutions, to complement existing brokerage system container solutions, for $36 million in cash. Descartes still carries no debt. Overall, we like to see continued bolt-on acquisition activity continue but are also pleased with an increased focus on organic growth. After adjusting our model for results and the outlook, along with our annual model roll, we are raising our fair value estimate to $52 from $45 per share and see shares as overvalued at current levels.