DESCARTES SYSTEMS GROUP INC (DSGX): what the price requires
At today's price, DESCARTES SYSTEMS GROUP INC (DSGX) is priced for today's economics sustained for ~7.0 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/DSGX
Headline
| Field | Value |
|---|---|
| Ticker | DSGX |
| Company | DESCARTES SYSTEMS GROUP INC |
| Current price | $72.45/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 11.9% |
| Operating margin today | 26.6% |
| Margin compression implied | -14.7pp |
| Must persist for | 7.0y |
| Multiple paid | 36x operating income |
The operating-margin requirement is derived from the framework's value band at year 9, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.03σ |
| sustained it ~7 years at this level | 23% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.40x | 5 | expensive |
| Earnings | 2.20x | 5 | expensive |
| Relative | 1.09x | 5 | expensive |
| Growth | 0.88x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $82.25 | 0.88x | yes | FCF base $0.3B, growth 14% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection |
| DCF Exit Multiple | Growth | $85.44 | 0.85x | yes | Exit EV/EBITDA: 26.0x / 28.0x / 30.0x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $69.60 | 1.04x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 29.0x / 35.0x / 41.0x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $20.22 | 3.58x | yes | BV/sh $18.49, ROE (TTM) 10.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $21.11 | 3.43x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $60.94 | 1.19x | yes | Rev $0.7B, growth 14% (input: historical growth; tapered), Terminal P/S: 6.6x / 8.0x / 9.4x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $63.53 | 1.14x | yes | EPS $1.87, growth 34% (input: historical EPS growth), PEG=1.14 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $16.12 | 4.49x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.14B × (1−25%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $21.28 | 3.40x | yes | BV $18.49 + 5yr PV of (ROE (TTM) 10.1% − Kₑ 9.3%) × BV; BV grows 6.6%/yr |
| Graham Number | Asset | $27.89 | 2.60x | yes | √(22.5 × EPS $1.87 × BVPS $18.49) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $65.00 | 1.11x | yes | EBITDA $0.22B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $35.52 | 2.04x | yes | FCF $260.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $32.94 | 2.20x | yes | SBC-adj FCF $0.24B (FCF $0.26B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $60.34 | 1.20x | yes | EPS $1.87 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $24.11 | 3.00x | yes | BV $18.49 × (ROIC 12.0% / WACC 9.2%) |
| P/Sales Sector | Relative | $66.59 | 1.09x | yes | Revenue $0.73B × sector P/S 8.0x |
| PEG Fair Value | Relative | $70.13 | 1.03x | yes | EPS $1.87 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $20.22 | 3.58x | yes | EPS $1.87 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $356.5m |
| Net debt / NOPAT (after-tax) | -2.91x (net cash) |
| Net debt / operating income (pre-tax) | -2.20x (net cash) |
| Interest coverage | 146.3x |
| Share count CAGR (dilution) | 0.4% |
| Burning cash | no |
Bullet Takeaways
At $67.38 the growth-DCF methods land above the price (about $81 to $82) and the relative-multiple method lands on it (about $70), so the forward-looking frames justify the valuation while the static asset and earnings-power frames near $16 to $21 say expensive.
The business is a clean recurring-revenue network: Q1 fiscal 2027 set records with revenue up 15% to $193.6 million, gross margin near 78%, services at 93% of revenue, and operating cash flow up 40% to $75 million, with net cash of about $316 million funding continued tuck-in acquisitions.
The price embeds about six and a half years of durable compounding in a competitive market that includes SAP, Manhattan Associates, Kinaxis, E2open, and project44, with the trade-complexity tailwind genuine but partly event-driven and the freight cycle a near-term swing factor.
Bull Case
Look at where $67.38 sits against each family of valuation method and the bull case organizes itself. The growth-DCF methods land above the price (DCF Perpetual Growth about $82.34, DCF Exit Multiple about $80.84), the relative-multiple method lands right on it (about $69.60 at a sector P/E of 35x with a Peter Lynch PEG of roughly 1.06, flagged as fair), and only the static asset and earnings-power frames sit well below. That pattern is the signature of a high-quality recurring-revenue compounder: the methods that account for growth justify the price, and the methods that ignore growth understate it. The market is paying for a durable cash machine, and the forward-looking methods agree.
The machine itself is unusually clean. Descartes runs a logistics and global-trade software network where services are about 93% of revenue, gross margin runs near 78%, and Q1 fiscal 2027 set records: revenue up 15% to $193.6 million, adjusted EBITDA at a record level, net income up to $48.5 million, and operating cash flow of $75 million, up 40%. A subscription network with that margin profile and 40% cash-flow growth is the kind of asset-light franchise that conventional book-value methods simply cannot see, which is why the excess-return models land near $20 against a $67 price.
The third leg is the trade-complexity tailwind, which is rare in that it strengthens precisely when the macro gets messier. The growth in Q1 came from global trade intelligence and AI, driven by demand for tariff and duty content, sanctioned-party screening, foreign-trade-zone tools, and e-commerce customs processing. When tariffs rise and trade rules multiply, every shipper needs more of exactly what Descartes sells. The company also bolted on two AI-focused acquisitions (OrderMine and Idelic) to extend into fleet safety and order intelligence, continuing the disciplined tuck-in model that has compounded the network for years. With a net cash position of about $316 million and almost no debt, the balance sheet funds that roll-up without strain.
Bear Case
The threat to Descartes is competitive, and it is worth naming the field before reaching for a multiple. Descartes sits in a logistics and supply-chain software market crowded with well-capitalized rivals: Manhattan Associates, SPS Commerce, Kinaxis, E2open, project44, and the giant in the room, SAP, whose supply-chain and business-network products hold meaningful share. SAP's own filing frames the stakes bluntly, noting that as AI reshaped competitive dynamics across software, enterprises increasingly distinguished between platforms that could integrate and scale intelligence effectively and those at risk of falling behind [SAP FY2025 20-F, accession 0001104659-26-020058]. Descartes is a focused mid-cap competing against a vendor that can bundle logistics into a much larger enterprise suite, and against venture-funded specialists in real-time visibility. The network-effect moat is real, but it is not unassailable.
The valuation is where that competitive risk bites. At $67.38 (June 27, 2026) the stock trades at roughly 34 times operating income, and the inversion runs in duration mode: to justify the price the model has to assume the elevated economics persist for about six and a half years, with the fade signal tripped and the rate-robustness check failing. The earnings-power method, which capitalizes normalized earnings with no growth, lands at about $16.13, and the asset and excess-return methods cluster near $20. The entire premium above those static frames is a bet on durable, defensible growth, and durability is exactly what a competitive AI-software market threatens.
The near-term operating risk is the freight cycle. Management delivered record numbers despite what it called a challenging freight market, which is impressive, but a sustained downturn in shipment volumes pressures the transaction-based portion of the revenue and slows the upsell engine. The current-quarter trade-complexity tailwind is genuine but also somewhat event-driven; if tariff regimes stabilize or e-commerce customs volumes normalize, one of the engines behind the 15% growth cools. The bear case is not that Descartes is a poor business. It is that an excellent business priced for six-plus years of uninterrupted compounding, in a market where SAP and a pack of specialists are investing heavily in the same AI capabilities, leaves little room if the moat erodes even at the edges.
Valuation
Descartes is priced as the high-quality recurring-revenue compounder it is, with the method spread telling you exactly what the price assumes. At $67.38 the inversion reads a roughly 34 times operating-income multiple and runs in duration mode, meaning the price is justified not by an extreme growth rate but by the elevated economics persisting for about six and a half years. The composite reads elevated, the fade signal is tripped, and the rate-robustness check fails, all flags that the priced-in durability is longer and more rate-sensitive than the typical name.
The families split cleanly. The growth-DCF methods reach above the price (DCF Perpetual Growth about $82.34, DCF Exit Multiple about $80.84) by extrapolating roughly 14% growth forward. The relative-multiple methods land right at the price (Relative Valuation about $69.60, Peter Lynch about $63.53 with a PEG near 1.06). The forward market-cap method is close behind at about $60.94. The static frames are far below: Earnings Power Value about $16.13 on five-year normalized EBIT, and the excess-return methods near $20 to $21, both depressed because book value is small relative to the cash the network generates and because trailing ROE understates the asset-light economics. The price is justified by the relative and growth families, while the asset and earnings-power families say expensive.
The honest synthesis is that this is a quality-premium valuation that the forward-looking methods support and the backward-looking methods do not. The business deserves a premium (services at 93% of revenue, 78% gross margin, 40% cash-flow growth, net cash of about $316 million), but the buyer at $67 is underwriting six-plus years of sustained compounding against a competitive field that includes SAP and well-funded specialists. The valuation works if the growth and the moat both hold, and it is the durability, not the current quality, that is the open question.
Catalysts
The key recent event was record Q1 fiscal 2027 results on June 3, 2026. Revenue rose 15% to $193.6 million, net income increased to $48.5 million from $36.2 million, gross margin improved to 78%, and adjusted EBITDA reached a record level. Services revenue, the recurring backbone, rose 15% to $180.5 million and represented 93% of the total, while operating cash flow jumped 40% to $75 million. Management delivered these numbers despite describing the freight market as challenging, which is the central proof point for the bull case.
The growth drivers and strategic moves are the forward catalysts. Q1 strength came from global trade intelligence and AI, with demand for tariff and duty content, sanctioned-party screening, foreign-trade-zone tools, and e-commerce customs processing, alongside fleet performance management and transportation visibility. The company closed two AI-focused acquisitions, OrderMine for about $2.3 million plus earn-out and Idelic for about $25.3 million plus earn-out, extending into fleet safety and order intelligence. The pace and integration of further tuck-ins, funded by the net-cash balance sheet, is the recurring catalyst to watch, as is the trajectory of trade-complexity demand if tariff regimes shift.
Analyst sentiment is constructive, with a consensus rating around Buy to Strong Buy and price targets well above the current price (consensus targets reported in the $110 to $130 range), reflecting confidence in the recurring-revenue model. The watch items are the freight cycle, which pressures transaction-based revenue in a downturn, and any normalization in tariff and customs volumes that would cool one of the current growth engines. The next quarterly print and the cadence of acquisitions are the near-term markers.
Sources: https://www.globenewswire.com/news-release/2026/06/03/3306424/0/en/Descartes-Announces-Fiscal-2027-First-Quarter-Financial-Results.html , https://www.stocktitan.net/news/DSGX/descartes-announces-fiscal-2027-first-quarter-financial-4k8mzzss5w5s.html , https://www.gurufocus.com/news/8904651/the-descartes-systems-group-inc-dsgx-q1-2027-earnings-call-highlights-record-revenue-and-strong-profitability-amid-geopolitical-challenges , https://www.marketbeat.com/stocks/NASDAQ/DSGX/competitors-and-alternatives/
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- MANH (MANHATTAN ASSOCIATES, INC.)
- FY2025 10-K: …executives and employees. We face significant competition for individuals with the skills required to perform the services we offer, and thus we may encounter increased compensation costs that are not offset by increased revenue. In the broader technology industry in which we compete for talented hires, there is…
- FY2025 10-K: …that require special skills. We also use third-party translation companies to localize our application software into various languages including Chinese, French, Japanese and Spanish. Competition Our solutions are solely focused on enterprise commerce capabilities. Our solutions help global distributors, wholesalers,…
- SPSC (SPS COMMERCE, INC.)
- FY2025 10-K: …consolidate or will be acquired. In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties. New entrants not currently considered to be competitors may also enter…
- FY2025 10-K: …requires us to make difficult, subjective, or complex judgments relating to uncertain matters that could have a material effect on our financial condition and results of operations. Accordingly, we believe that our policies for revenue recognition, internally developed software, and business combinations are the most…
- YMM (Full Truck Alliance Co. Ltd.)
- FY2025 20-F: …or administrative penalties, and/or materially and adversely affect the Group's financial conditions, operations and business prospects. We may not be able to compete effectively, which could materially and adversely affect the Group's business, financial condition, results of operations and prospects, as well as its…
- FY2025 20-F: …positions in technology and logistics companies. Our investment in these entities involves significant risks that are outside of our control. We have limited influence over our minority-owned investees. As a result, the boards of directors or management teams of these companies may make decisions or take actions with…
- GLBE (Global-E Online Ltd.)
- FY2025 20-F: 64 Components of Our Results of Operations Revenue. Our revenue is comprised of service fees and fulfillment services fees. Service fees revenue is generated as a percentage of the transaction value that flows through our platforms as well as additional fees from value added services. Fulfillment services revenue is…
- FY2025 20-F: …proprietary software technologies; • our dependency on our executive officers and other key employees and our ability to hire and retain skilled key personnel, including our ability to enforce non-compete agreements we enter into with our employees; • litigation for a variety of claims which we may be subject to; •…
- VERX (Vertex, Inc.)
- FY2025 10-K: …our competitors who currently focus their tax compliance services on small- to medium-sized businesses may be better positioned to increase their market share with small- to medium-sized businesses and may choose to enter our markets, whether competing based on price, service or otherwise. We also face a growing…
- FY2025 10-K: Research and development 11.2 % 10.0 % Selling and marketing 26.3 % 25.6 % General and administrative 23.9 % 22.9 % Depreciation and amortization 3.3 % 3.1 % Change in fair value of acquisition contingent earn-outs (2.3) % 2.6 % Other operating expense (income), net 1.7 % - % Total…
- NICE (NICE LTD.)
- FY2025 20-F: …competitive and we may be unable to compete successfully. The markets for our products, solutions and related services (also referred to elsewhere in this annual report as our "offerings") are, in general, highly competitive. Our competitors include a number of large, established software development vendors. Some of…
- FY2025 20-F: …by vertical solutions' players expanding their portfolios in the digital customer experience ("CX") market. We may also experience increased competition if large horizontal analytics providers and domain specific competitors in adjacent markets enter or 2 increase their presence in the Financial Crime and Compliance…
- SSNC (SS&C TECHNOLOGIES HOLDINGS, INC.)
- FY2025 10-K: …and services. The market for financial and healthcare services software and services is competitive, rapidly evolving and highly sensitive to new product and service introductions, technology innovations including artificial intelligence and marketing efforts by industry participants. The markets we serve are also…
- FY2025 10-K: …software. Our strength in this market is our ability to provide both broadly diversified and customizable solutions to our clients. Virtual Data Rooms: In our VDRs market , we compete for deals involving VDRs that facilitate strategic financial transactions and secure document exchange use cases. For mergers and…
- TDC (TERADATA CORP /DE/)
- FY2025 10-K: …scale. • Deal Mix - Refers to the type of transactions closed within the period that generate the total perpetual software license, hardware and other revenue. For example, a higher mix of Teradata versus third-party products can positively impact profitability. 34 Table of Contents Gross profit for the following…
- FY2025 10-K: …Licenses, Hardware and Other line items and the Consulting Services segment represents the Consulting Services. For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.