DESCARTES SYSTEMS GROUP INC (DSGX): what the price assumes

In the published model solve dated 2026-Q2, anchored at $81.60, DESCARTES SYSTEMS GROUP INC (DSGX) is priced for today's economics sustained for ~6.1 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/DSGX

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 9: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: n/a

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.

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)

Solvency

Bullet Takeaways

• Descartes runs a logistics network that customers pay to use by the transaction, and it loses only about 5% to 7% of its recurring services revenue a year in the ordinary course, which is the closest thing to a moat that enterprise software offers.
• Revenue in the quarter ended April 30, 2026 was 193.6 million dollars against 168.7 million a year earlier, and income from operations went to 62.5 million from 46.2 million, so profit is growing faster than sales rather than alongside them.
• The exposure that decides the next two years is freight volume itself: the company's own filing names the Iran Conflict's disruption of the Strait of Hormuz and shifting tariff regimes as live pressures on the shipments its revenue counts, with the next results due September 2, 2026.

Bull Case

In July the company bought a Chilean logistics-software business outright and paid for it out of the bank account. Drivin, a last-mile delivery platform used across Latin America, cost approximately 30 million US dollars up front, satisfied with cash on hand, plus a performance earn-out capped at 5 million over two years. No financing, no equity issued, no negotiation with a lender. That is the whole shape of the Descartes machine in one transaction.

It works because of what sits behind it. At April 30, 2026 the company held 377.0 million dollars of cash, and the filing notes that "All cash was held in interest-bearing bank accounts, primarily with major Canadian, US and European banks." Behind that sits a 350 million dollar revolving facility with a five-year term running to December 2027, expandable to 500 million with lender approval. Interest expense in the quarter was two-tenths of a million dollars. A company that has completed ten acquisitions since the start of fiscal 2025 and has never needed the facility to do it is telling you something about how much cash the underlying business throws off.

The underlying business is a network, and networks are sticky in a way software licences are not. Customers connect to trading partners through the Global Logistics Network, and the filing is direct about the attrition that produces: "In a typical year, based on our historic experience, we anticipate that over a one-year period we may lose approximately 5% to 7% of our aggregate annualized recurring services revenues from the previous year in the ordinary course, excluding consideration of new customers." Losing five to seven cents of every recurring dollar a year means the company starts each year with better than nine-tenths of the prior year already contracted. Everything above that is genuine growth.

Management runs the business against that arithmetic explicitly rather than aspirationally. It defines what it calls baseline revenues plainly: "We define our baseline revenues as our visible, recurring and contracted revenues." Costs are then held below that contracted base, which is why operating leverage here is a policy rather than a hope. The first quarter shows it working: revenue of 193.6 million dollars against 168.7 million a year earlier, with income from operations of 62.5 million against 46.2 million, and growth from new and existing customers contributing an incremental 18.7 million dollars of revenue. Revenue grew by roughly a seventh; operating profit grew by roughly a third.

Set that against the cohort. MANH runs a 25.6% operating margin but grew revenue only 4.8%; SPSC grew 13.8% at a 15.3% operating margin; SSNC earns 23.1% on 7.5% growth. Descartes is turning 193.6 million dollars of quarterly revenue into 62.5 million dollars of operating profit while growing at the faster end of that group. Very few enterprise software businesses hold both ends of that trade-off at once.

There is also a second-order advantage that has arrived without the company paying for it. Its network already carries the data that AI systems need, and the filing makes the connection: "GLN data includes collective intelligence available over our scaled network, providing our customers with additional information for their own AI solutions." Everyone selling logistics AI needs clean, timely trade-partner data. Descartes has spent twenty years accumulating the pipes that carry it.

Capital is coming back too. On December 11, 2025 the company began a normal course issuer bid to buy up to roughly 8.6 million common shares for cancellation, running through December 10, 2026, and retired 316 thousand shares under it during the quarter. For a serial acquirer, choosing to retire its own shares rather than buy someone else's is the more informative decision.

Bear Case

None of this revenue exists unless something physically moves. Descartes gets paid when shipments are booked, cleared, routed and documented, which makes the whole enterprise a derivative on global freight volume, and the company says so in its own risk language: "Significant declines in shipment volumes could likely have a material adverse effect on our business." The pressures on that volume right now are not hypothetical. The same filing records that "The Iran Conflict, in particular, has severely disrupted ocean shipping through the Strait of Hormuz, a key passage for the transport of global supplies of oil and fertilizer." Tariffs and retaliatory tariffs are separately named as forces reconfiguring where goods are made and how they travel.

The awkward part is that tariff complexity cuts both ways and the market has decided which way. More customs complexity means more compliance work, and Descartes sells compliance software, so trade friction reads as a tailwind. But friction that eventually suppresses the number of shipments is a headwind on the same revenue line, and the two effects do not arrive on the same schedule. The compliance work shows up first. The volume decline shows up later.

Underneath that sits a treadmill the filing quantifies without flinching: "In a typical year, based on our historic experience, we anticipate that over a one-year period we may lose approximately 5% to 7% of our aggregate annualized recurring services revenues from the previous year in the ordinary course, excluding consideration of new customers." That is a good number in enterprise software and it is still a number. Every year begins with a hole to fill before growth starts, and filling it in a soft freight market is harder than filling it in a strong one.

Then there is what today's price actually rests on. Two of the four ways of valuing this company do not reach it and are not close: the price sits roughly 220% above where the asset-value approaches land and about 107% above the earnings-power methods, which capitalize a multi-year average of operating profit and assume no growth at all. Peer multiples land essentially on the price, and only the forward cash-flow methods land above it. Take away the assumption that the compounding continues, and there is nothing underneath.

The growth that has to continue has partly been bought. Ten acquisitions have closed since the beginning of fiscal 2025, and that leaves a balance sheet weighted toward goodwill and acquired intangibles rather than anything you could sell. The filing spells out the reflexive risk in that: "Should the fair value of our net assets, determined by our market capitalization, be less than the carrying value of our net assets at future annual impairment test dates, we may have to recognize goodwill impairment losses in our results of operations in future periods." Read that carefully. A sustained decline in the share price is itself an input to whether the accounting has to recognize a loss, which then lands in reported earnings. The valuation and the accounting are wired together.

Competition is not the immediate problem, but it frames the ceiling. MANH earns a 25.6% operating margin growing 4.8%, SSNC 23.1% growing 7.5%, and VERX, selling adjacent trade and tax compliance software, is running a negative 1.7% operating margin while growing 11.8%. That last one is the useful data point: growing quickly in this category is not automatically profitable, and Descartes is currently doing both. The bear case is simply that the price already assumes it keeps doing both, for a long time, through a freight cycle it does not control.

Valuation

Where the methods land tells you what kind of company the market thinks this is, and here they split cleanly rather than argue.

The backward-looking lenses do not come near the price. Book value plus profitability lands well under it, with the price sitting roughly 220% above the asset-value approaches, and the price sits about 107% above the no-growth earnings methods. Peer sales and earnings multiples arrive essentially at today's price. Only the forward cash-flow methods land above it. That is the signature of a business the market is paying for on continuation rather than on what it has already banked.

The reason the no-growth lens lands so low is worth stating rather than leaving as a puzzle. It capitalizes a multi-year average of operating profit and assumes the business never grows again. For a company whose operating profit has risen in each of the last several fiscal years, an average across that window sits materially below where the business is running today. The most recent quarter produced income from operations of 62.5 million dollars against 46.2 million in the same quarter a year earlier. A no-growth frame is not measuring this company wrongly. It is answering a question the buyer at this price is not asking.

So the bet is duration, not rate. The pace itself is inside what Descartes has recently delivered; what the price requires is that the pace keeps going for far more years than most businesses manage. The contracted base gives that bet more support than most: "We define our baseline revenues as our visible, recurring and contracted revenues." Costs are managed against that base, which is why revenue up roughly a seventh in the quarter produced operating profit up roughly a third. The open question is what happens to the growth half of that equation when freight volumes turn, since the recurring base is contracted but the transactions running across it are not.

The cohort places the premium honestly. MANH earns a 25.6% operating margin on 4.8% revenue growth; SSNC 23.1% on 7.5%; SPSC 15.3% on 13.8%. Descartes is delivering margin near the top of that group with growth near the top as well, which is exactly the combination that gets paid for. The premium is not unexplained. It is simply already explained, which is a different kind of risk.

Solvency is the one place the analysis gets short. The company held 377.0 million dollars of cash at April 30, 2026, has a 350 million dollar revolving facility it has not needed, paid two-tenths of a million dollars of interest in the quarter, and funded a Latin American acquisition in July out of cash on hand. The share count has been essentially flat over four years and is now being reduced under a buyback authorization. There is no downside scenario here that runs through the balance sheet. Every scenario runs through shipment volume.

Catalysts

The first quarter of fiscal 2027, reported on June 4, 2026 for the period ended April 30, was the cleanest print the company has produced. Revenue was 193.6 million dollars against 168.7 million a year earlier, with growth from new and existing customers contributing an incremental 18.7 million dollars, and income from operations rose to 62.5 million dollars from 46.2 million. Interest expense was two-tenths of a million dollars, and cash finished the quarter at 377.0 million dollars after funding acquisitions and buybacks.

The acquisition engine kept running. On July 6, 2026 Descartes announced the purchase of Drivin, a Santiago-based last-mile delivery management platform serving distributors, retailers and logistics providers across Latin America, for approximately 30 million US dollars up front from cash on hand plus a performance earn-out capped at 5 million US dollars tied to revenue targets over the first two years. It is the tenth-plus deal since the start of fiscal 2025 and fits the pattern: small, adjacent, self-funded, and aimed at feeding more delivery data into the existing network.

Two other things are worth a calendar entry. The normal course issuer bid that began December 11, 2025 runs to December 10, 2026 and allows the repurchase of up to roughly 8.6 million common shares for cancellation, of which 316 thousand were retired in the quarter to April 30. And the macro backdrop the company itself flags remains unresolved: disrupted ocean shipping through the Strait of Hormuz and shifting tariff regimes both feed directly into the shipment counts that drive transaction revenue. Second-quarter results are scheduled for September 2, 2026.

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.