Descartes gets price target raise to $21.50 by Global Maxfin’s Garcea

Recent acquisitions by Descartes Systems Group (TSX:DSG) will drive its growth going forward, says Global Maxfin Capital’s Ralph Garcea.

Yesterday, before market open, Descartes reported its fourth quarter and fiscal 2014 results. For the year, the Waterloo-based company earned $9.6-million on revenue of $151.3-million, a topline that was up 19% over 2013. In the fourth quarter, Descartes earned $2.9-million on revenue of $40.3-million.

New Descartes CEO Ed Ryan characterized the quarter.

“Our strategy of focusing on recurring revenues, organic growth and complementary acquisitions continues to deliver consistent, predictable financial results,” he said. “In addition to growing fourth-quarter revenues by 19 per cent over the prior year, we also generated record quarterly adjusted EBITDA of $11.9-million. As we look ahead to fiscal 2015, 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.”

Garcea says the fourth quarter numbers exceeded his expectations. He believes there are both short term and long term catalysts for the company. Short term, the Global Maxfin analyst believes recent acquisitions such as Compudata and Impatex will drive higher margin topline growth. Long term, he says an expanding geographic footprint is among the factors that will secure the company’s future.

In a research update to clients yesterday, Garcea maintained his STRONG BUY rating on Descartes, but increased his one-year target price to (C) $21.50) from his previous $20.00 target.

At press time, shares of Descartes on the TSX were up .5% to $15.58.

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