Descartes Systems is still undervalued, says Industrial Alliance

Descartes Systems Group’s (TSX:DSG, Nasdaq:DSGX) upcoming fourth quarter results should demonstrate stability and investors should take advantage of a recent pullback in the company’s share price to buy the stock, says Industrial Alliance Securities analyst Blair Abernethy.
On Thursday, March 3, Descartes will report its 2016 fourth quarter and annual results.
Abernethy says he is expecting Descartes will post EBITDA of $16-million on revenue of $48.3-million in the fourth quarter, numbers that are in-line with the street consensus.
The Industrial Alliance analyst says he will be watching for how Descartes mid-quarter acquisition of Oz Development strengthens its existing relationships with Netsuite and UPS. He says he is also keen to learn of progress on the partnership front, particularly with long-time partner SAP. And he says he will be scrutinizing forex headwinds, which he says have been a challenge for the Waterloo-based company, but one he expects to abate as 2016 moves on.
Descartes closed at a 52-week high of more than (U.S.) $20.00 to close 2015 to current prices under $17.00. Abernethy says the current price of Descartes represents a good entry point for investors.
“We would continue to be buyers of the stock ahead of the quarterly results, given the recent pullback in the stock from ~$20.00, the stability of its business model, and the history of resilient operational performance in the face of weak macro environments,” he says.
In a research update to clients yesterday, Abernethy maintained his “Buy” rating and one-year price target of (U.S.) $21.00 on Descartes Systems Group, implying a return of 28.4 per cent at the time of publication.