Descartes Systems Group gets price target raise at Industrial Alliance

Q2 results that were slightly above consensus expectations have Industrial Alliance Securities analyst Blair Abernethy feeling a little more bullish about Descartes Systems Group (TSX:DSG, Nasdaq:DSGX), but the analyst isn’t quite yet ready to pull the trigger on the stock.

On Wednesday, Descartes reported its Q2, 2018 results. The company earned (U.S.) $7.15-million on revenue of $57.3-million, a topline that was up 13 per cent from the same period last year.

“Our continued strong financial performance reflects the dedication of our employees to delivering success to our customers,” said CEO Ed Ryan. “With the recent additions of ShipRush, PCSTrac and MacroPoint to our global logistics network (GLN), we’ve added even more solutions, content and capabilities that can improve the security and efficiency of our customers’ operations. We believe that our expanded GLN is the leading global platform for customers to research, plan, execute and monitor multimodal shipments around the world.”

Abernethy notes that the results were in-line with his and above consensus expectations. While the analyst says the company’s recent acquisitions are performing well, he still sees the stock as near fully valued at this time.

“Trading at 27.2x P/E (F2018E), we continue to watch for potential catalysts that include accretive acquisitions, large retail wins, and improved organic revenue growth driven, in part, by cross selling,” the analyst says.

In a research update to clients today, Abernethy maintained his “Hold” rating but raised his one-year price target on the stock from (U.S.) $24.00 to $25.50, implying a return of negative 10.2 per cent at the time of publication.

Abernethy thinks Descartes will generate EBITDA of (U.S.) $81.1-million on revenue of $236.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $90.2-million on a topline of $261.9-million the following year.