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The Descartes Systems Group Inc DSGX

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Descartes Tops Year With Record Quarter; 2021 to Focus More on Organic Growth; FVE up to $52

Dan Romanoff, CPA Equity Analyst

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.

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Company Profile

Business Description

The Descartes Systems Group provides a software solution that allows users in the shipping industry to communicate with one another. The core product is the Global Logistics Network, which is best understood as transaction driven. Descartes charges clients to send/receive messages, data, and documents on the GLN (the transactions). Customers typically contract for a monthly minimum over a multiyear period. The GLN platform allows for Descartes to upsell additional software modules as well, typically provided via a software-as-a-service model.

120 Randall Drive
Waterloo, ON, N2V 1C6, Canada
T +1 519 746-8110
Sector Technology
Industry Software - Application
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 31, 2021
Stock Type
Employees 1,610