DSGX Stock Study (6-2-26)

Posted by Mark on June 30, 2026 at 07:21 | Last modified: June 2, 2026 03:43

I recently did a stock study on The Descartes Systems Group, Inc. (DSGX, $79.85).

M* writes:

     > Descartes Systems Group provides a software solution that
     > allows users in the shipping industry to communicate with
     > one another. Its core product is the Global Logistics
     > Network, which is best understood as transaction-driven.
     > Descartes charges clients to send/receive messages, data,
     > and documents on the GLN. Customers typically contract for
     > a monthly minimum over a multiyear period. The GLN platform
     > allows Descartes to upsell additional software modules as
     > well, typically provided via a software-as-a-service model.

Over the past 10 years, this small-size company has grown sales and earnings 15.4% and 24.7% per year, respectively [FY ends Jan 30; year labels on BI website and Value Line (VL) incremented by one to compensate]. Lines are up, straight, and parallel. VL gives an Earnings Predictability score of 85. Shares outstanding increase 14.5% (1.5%/year).

Over the past 10 years, PTPM leads peer and industry averages while ranging from 15.5% to 29.8% (’26) with a last-5-year mean of 27.5%. ROE is roughly even with industry averages and leading peers while increasing from 5.6% to 10.4% (’26) with a last-5-year mean of 9.7% (shareholder equity consistently positive with 15.9% CAGR). Debt-to-Capital is less than peer and industry averages with a last-5-year mean of 0.7%.

Quick ratio is 2.0 and interest coverage 225 (no long-term debt) per M* who assigns “Narrow” Economic Moat, gives “Standard” rating for Capital Allocation and an A grade for Financial Health (per BetterInvesting® website). VL gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 10.9% and 11.0% for ’27 and ’28, respectively (based on 12 analysts).
• Zacks gives YOY ACE 10.8% and 10.5% for ’27 and ’28 (4 analysts).
• VL projects 9.1% per year from ’26-’31.
• M* gives 2-year ACE of 36.5% per year and projects 5-year CAGR of 10.4% in Equity Report.

My 9.0% per year forecast is below the range.

With regard to EPS growth:

• MarketWatch gives ACE 19.8% and 21.0% per year for ’26-’28 and ’26-’29, respectively (based on 15 analysts).
• Nasdaq.com gives ACE 19.6% and 18.8% per year for ’27-’29 and ’27-’30 [3 / 2 / 1 analyst(s) for ’27 / ’29 / ’30].
• Seeking Alpha projects 4-year CAGR of 20.9%.
• Finviz gives 5-year annualized ACE of 20.4% (7).
• YF gives YOY ACE 39.3% and 18.6% for ’27 and ’28, respectively (7).
• Zacks gives YOY ACE 40.1% and 15.3% for ’27 and ’28, respectively (3).
• VL projects 17.6% per year from ’26-’31.
• M* projects 5-year CAGR of 13.0% (lower of GAAP/adjusted) in Equity Report.

My 13.0% forecast is bottom of the long-term-estimate range (mean of four: 18.0%). Initial value is ’26 EPS of $1.87/share.

My Forecast High P/E is 45.0. Over the past decade, high P/E ranges from 66.5 in ’26 to 105 in ’21 with last-5-year mean of 73.8 and a last-5-year-mean average P/E of 61.6. I am well below the range.

My Forecast Low P/E is 30.0. Over the past decade, low P/E ranges from 39.6 in ’26 to 69.8 in ’20 with a last-5-year mean of 49.4. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $55.80 is default based on initial value from above: 30.1% less than previous close and 10.9% less than the 52-week low.

These inputs land DSGX in the BUY zone with a U/D ratio of 4.5. Total Annualized Return (TAR) is 16.0%.

PAR (using Forecast Average—not High—P/E) of 11.9% is less than I seek for a small-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 59 studies done in the past 90 days (my study and 16 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 11.0%, 13.5%, 45.0, and 33.0, respectively. I am less than or equal across the board. VL projects a future average P/E of 40.0 that is greater than MS (39.0) and greater than mine (37.5).

MS high / low EPS are $3.55 / $1.85 versus my $3.45 / $1.87 (per share). VL/M* high EPS of $4.20 is greater than both.

MS LSPF of $56.00 implies a Forecast Low P/E of 30.3: less than the above-stated 33.0. MS LSPF is 8.3% less than the default $1.85/share * 33.0 = $61.05 resulting in more conservative zoning. MS LSPF is still 0.4% greater than mine.

MOS is robust in the study because my inputs are near or less than historical/analyst/MS averages/ranges. MS TAR exceeding mine by 2.9% supports the assessment.

With regard to valuation, PEG is 1.7 and 2.7 per M* and my projected P/E: slightly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.64. “Quick and Dirty” DCF [perplexingly] has stock undervalued by 59% while M* reports the stock at a 15% discount.

Per U/D, DSGX is a BUY right now under $80/share. Given a forecast high price ~$155, BetterInvesting® TAR criterion is met [155.3 / ((14.87 / 100 ) +1 ) ^ 5] ~ $77.50.

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