Cantor Fitzgerald raises target on Descartes Systems Group

Descartes Q3, reported this morning, was the company's first with new CEO Ed Ryan at the helm.

Descartes Systems Group (TSX:DSG) has a healthy balance sheet and a “strong pipeline” of acquisition opportunities that suggest it can continue to rapidly expand, says Cantor Fitzgerald analyst Blair Abernethy.

This morning, Descartes reported its Q3, 2014 numbers. The company earned (U.S.) $2.18-million on revenue of $38.8-million, which was up 19% from the company’s $32.7-million Q3 topline last year.

New Descartes CEO Ed Ryan said he was happy with the company’s Q3.

“We’re pleased with the company’s performance during the third quarter, which led to record results and continued strong growth in revenues and cash flow,” he said. “Our success continues to be driven by strong execution against our buy and build strategy, as well as our focus on delivering business value to the members of the Global Logistics Network. Our focus on customer success enables our business to thrive, and we remain optimistic about Descartes’s future as we continue to see strong demand for our SaaS-based solutions that drive the largest collaborative logistics community in the world.”

In a research update to clients this morning, Blair Abernethy, who is taking over coverage of Descartes at Cantor from Justin Kew, maintained the firm’s BUY rating on Descartes, but raised the firm’s target price on the stock from (U.S.) $15.00 to $15.50 (C)$16.30.

Abernethy believes Descartes will post EBITDA of $44.2-million on revenue of $150.4-million in fiscal 2014. He believes that will climb to $50.3-million EBITDA on revenue of $170.1-million in fiscal 2015.

His target, explains Abernethy, is based on which equates to 19.1x his estimate of Descartes fiscal 2015 earnings, a number he believes the company has earned given the strength of its business model, its strong balance sheet and an expanded product offering.

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