Under the guidance of new management, Waterloo’s Descartes Systems Group (TSX:DSG) is continuing a longer trend of making sensible, accretive acquisitions, says Cantor Fitzgerald analyst Blair Abernethy.
Descartes this morning announced that it had acquired two companies. Swiss-based Compudata, a provider of messaging solutions primarily to Swiss retailers and their suppliers, was picked up for (U.S.) $17.9-million and Impatex, a Cadnam, England-based provider of freight forwarding and electronics customs filings, was acquired for (U.S.) $8.3-million.
Newly appointed Descartes CEO Ed Ryan explained the reasoning behind the larger acquisition.
“Descartes is establishing itself as the global network for communities collaborating on logistics and supply chain processes. The addition of Compudata’s solutions and community to our logistics technology platform is another important step on this journey, and it further strengthens our global market leadership position,” he said. “Our customers now have access to a broader scale and scope of document-critical functionalities that are key to moving goods. This can help them link critical elements and information in the supply chain, increase data accuracy, and make the flow of goods more efficient.”
Abernethy, noting that Descartes trades at 17.5× his estimate of the company’s fiscal 2015 adjusted EPS, says the company deserves such a valuation because it is expanding its product offering, has strong cross-selling opportunities, and has a more than solid balance sheet.
In a research update to clients this morning, Abernethy maintained his BUY rating and $15.50 one-year target on Descartes. This target, he says, equates to 19.1x his estimate of fiscal 2015 adjusted EPS. The Cantor Fitzgerald analyst says he will soon be reviewing his estimate to include today’s acquisitions.
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