Descartes still a “top idea” for this analyst

National Bank Financial analyst Doug Taylor says Descartes Systems Group’s (The Descartes Systems Group Stock Quote, Chart, News, Analysts, Financials NASDAQ:DSGX) fiscal Q2 reinforced his view that the company can sustain high-single-digit organic growth while compounding through M&A.

As reported by the Globe and Mail, in a Sept. 14 update, Taylor maintained his “Outperform” rating and raised his target to US$100 from US$95. His target is based on an unchanged 17.5 times NTM-plus-one EBITDA.

“Descartes remains a top idea in our coverage universe,” Taylor said.

Descartes reported fiscal Q2 2027 revenue of US$201.1-million, up 12% year-over-year and 4% sequentially. Services revenue rose 13% to US$188.6-million, representing 94% of total revenue.

Adjusted EBITDA increased 18% year-over-year to US$94.4-million, while Adjusted EBITDA margin improved to 47% from 45% a year earlier.

Diluted EPS was 57 cents, up from 43 cents a year earlier. Cash from operating activities increased 28% to US$81.3-million.

Taylor said Descartes’ Q2 results support a premium valuation, helped by recurring services revenue, strong margins and disciplined acquisitions.

Descartes also completed two recent acquisitions, buying Transportation Applied Intelligence Software for US$99.3-million and Extensiv for US$119.9-million. Both deals were funded with cash on hand.

Descartes CEO Edward Ryan said customers need supply chains and logistics operations to remain agile in a more dynamic global trade environment.

Taylor said the quarter and recent capital deployment support higher estimates and the increased target.

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