Descartes Systems (TSX:DSG), the Waterloo based logistics tech provider, turns thirty this year. In 1981, the year the company arrived on the scene, IBM released its first personal computer and Sony introduced 3 1/2″ floppy drives and diskettes. More recent trends in technology, such as a move towards real time tracking and automation in supply chain management systems, have shares of the Waterloo mainstay showing signs of life for the first time in a decade.
Descartes stock has climbed from under $3 in early 2009 to over $7 late last year. The company, which has completed six acquisitions since the beginning of 2009, saw its revenue rise from $52 million in fiscal 2007 to nearly $74 million in fiscal 2010. Descartes finds itself at the cutting edge of a trend; across the globe governments are looking to untangle and standardize their logistics operations. An increasing amount of evidence suggests a clear link between logistics performance and economics growth. The World Bank’s Logistics Performance Index showed that low and middle income countries such as Brazil and Columbia have given their economies a shot in the arm through improved logistics, while other emerging economies, such as Turkey, have been hurt by a lack of logistics infrastructure.
On January 1st of this year, the European Union introduced new customs compliance regulations to standardize and automate its customs filings process. But Descartes plan to capitalize on these regulatory opportunities was already well underway. In April of 2010, the company completed a $43.7M acquisition of Porthus, a Belgian supply chain management firm. Descartes has since had a number of notable wins in Europe, adding British Airways (BA) World Cargo and Dutch food services company Sligro Food Group to a client list that includes 1,600 ground carriers and more than 90 airlines. Other new clients, such as Dole Ocean Cargo and American Airlines Cargo were won expressly for Descartes ability to maneuver the new EU regulations.
So after a decade of being downgraded or ignored, is thirty the new twenty for Descartes? Many analysts think so. The company began to see the occasional Buy rating pop up around the time of the Portheus acquisition. Tom Liston, a top rated IT analyst with Versant partners, was an early observer of Descartes resurgence. He recently upgraded his target to $8.40 from $7.75, citing the company’s “exceptional” fundamentals.