Cantor Fitzgerald raises target on Descartes to $11.50

Cantor Fitzgerald analyst Tom Liston says that with 33 consecutive quarters EBITDA improvement, Descarte’s Q4 isn’t exactly a surprise. Still, he says the numbers, which narrowly beat his own expectations, underline his investment thesis.

This morning, Descartes System Group (TSX:DSG) reported its Q4 and fiscal 2013 results. For the year, The Waterloo-based company earned $15.99-million on revenue of $126.9-million. Q4 revenue came in $33.8-million, which was up 14% from Q4, 2012’s $29.6-million topline.

CEO Art Mesher said the company is winning business because its practices are modern.

“The world has entered a new era of ‘always on and always connected,’ where the ‘big data’ environment is driving transparency in costs, prices and performance. In this new era, product life cycles and shelf lives are shortening quickly,” he said. “For supply chains to remain effective and relevant, businesses need to participate on a community level, where trusted technology service providers, like Descartes, deliver results to customers and enable multiple parties to communicate, collaborate, and manage compliance with a shared set of services.”

Cantor Fitzgerald analyst Tom Liston says that with 33 consecutive quarters EBITDA improvement, Descarte’s Q4 isn’t exactly a surprise. Still, he says the numbers, which narrowly beat his own expectations, underline his investment thesis. The Cantor Fitzgerald analyst says Descartes is a strategic vendor whose products are benefiting from a larger network effect that means high margins and recurring revenue. In a research update to clients today, Liston maintained his BUY rating on Descartes and raised his target price by fifty-cents, to $11.50.

Liston says Descartes still trades at a steep discount to peers in the logistics business, such as E2open and Trimble, and SaaS companies such as LogMeIn and SciQuest.

Shares of Descartes Systems on the TSX closed today up 4.55% to $9.88.

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