The Descartes Systems Group, Inc. – Value Analysis (NASDAQ:DSGX) : August 4, 2017

Capitalcube gives The Descartes Systems Group, Inc. a score of 53.

Our analysis is based on comparing The Descartes Systems Group, Inc. with the following peers – Manhattan Associates, Inc., Oracle Corporation, SAP SE Sponsored ADR, American Software, Inc. Class A and Amber Road, Inc. (MANH-US, ORCL-US, SAP-US, AMSWA-US and AMBR-US).

Investment Outlook

The Descartes Systems Group, Inc. has a fundamental score of 53 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 4.44 is about median in its peer group.
  • The market expects faster earnings growth from DSGX-US than from its peers and also a turnaround in its current ROE.
  • DSGX-US employs relatively high amounts of assets while generating relatively median profit margins.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • DSGX-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • Compared with the peers chosen, DSGX-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • DSGX-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

DSGX-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 0.01% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 3.86%), and a well-cushioned interest coverage level of 51.43x, DSGX-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 5 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include MANH-US and AMSWA-US.

DSGX-US has maintained its Quick & Able profile from the recent year-end.

  • DSGX-US‘s interest coverage is downward trending and is below (but within one standard deviation of) its five-year average interest coverage of 118.22x.
  • The decrease in its interest coverage to 51.43x from 55.08x (in 2017) was also accompanied by a decrease in its peer median during this period to 34.04x from 37.18x.
  • Interest coverage fell 0.51 points relative to peers.
  • DSGX-US‘s debt-EV continues to trend downward and is below (but within one standard deviation of) its five-year average debt-EV of 1.15%.
  • Compared to 2017, debt-EV has remained relatively stable for both the company (0.01%) and the peer median (3.86%).

Access the detailed analysis for The Descartes Systems Group, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Manhattan Associates, Inc. 0 1.67 No interest exp 999
Oracle Corporation 32.17 3.08 7.38 25.36
SAP SE Sponsored ADR 7.72 1.13 16.64 57.33
American Software, Inc. Class A 0 2.56 No interest exp 999
Amber Road, Inc. 10.76 0.64 -17.67 -16.75
Descartes Systems Group Inc. 0.01 1.7 51.43 31544.31
Peer Median 3.86 1.69 34.04 528.17
Best In Class 0.01 3.08 No interest exp 31544.31

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Company Profile

The Descartes Systems Group, Inc. is an information technology company, which provides logistics technology solutions. It specializes in cloud-based solutions including modular and software-as-a-service to route, schedule, track, and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access and leverage global trade and restricted party data; file customers and security documents for imports and exports; research and perform trade tariff and duty calculations and to complete numerous other logistics processes. It primarily supports transportation industry, logistics service providers, third-party logistics providers, freight forwarders, and custom brokers. The company was founded on May 22, 1981 and is headquartered in Waterloo, Canada.


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