Fact based stock research
Descartes Systems (TSX:DSG)

CA2499061083

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For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".

Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".

Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.

Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.

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Descartes Systems stock research in summary

descartes.comhome

ANALYSIS: With an Obermatt Combined Rank of 81 (better than 81% compared with investment alternatives), Descartes Systems (Application Software, Canada) shares have much better financial characteristics than comparable stocks. Shares of Descartes Systems are low in value (priced high) with a consolidated Value Rank of 22 (worse than 78% of alternatives). But they show above-average growth (Growth Rank of 72) and are safely financed (Safety Rank of 95, which means below-average debt burdens). ...read more

RECOMMENDATION: A Combined Rank of 81, is a strong buy recommendation based on Descartes Systems's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Descartes Systems exhibits low value (Obermatt Value Rank of 22), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 72). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 95) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). Obermatt Premium subscribers can further check the stock’s Sentiment Ranks, which also flow into the Obermatt 360° View for investors. ...read more

Latest Obermatt Ranks


360° View^new
Sentiment Rank^new
Value Rank	22
Growth Rank	72
Safety Rank	95
Combined Rank	81

Country	Canada
Industry	Application Software
Index	NASDAQ, TSX Composite
Size class	Medium

19-Dec-2024. Stock data may be delayed. Log in or sign up to get the most recent research.

Further information

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Review the performance ranks of the individual metrics that form each investment strategy.

Research History: Descartes Systems

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	16	11	21	22
GROWTH
GROWTH	86	61	51	72
SAFETY
SAFETY	51	85	100	95
SENTIMENT
SENTIMENT	n/a	63	61	^new
360° VIEW
360° VIEW	n/a	67	74	^new

Most recent update of the stock research: 19-Dec-2024. Financial reporting date used for calculating ranks: 31-Oct-2024. Stock research history is based on the Obermatt Method. The higher the rank, the better Descartes Systems is in the corresponding investment strategy.
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Combined financial peformance in Detail

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	16	11	21	22
GROWTH
GROWTH	86	61	51	72
SAFETY
SAFETY	51	85	100	95
COMBINED
COMBINED	44	54	77	81

Last update of combined financial performance: 19-Dec-2024. Stock analysis on combined financial performance: The higher the rank of Descartes Systems the better the performance.

Value Metrics in Detail

ANALYSIS: With an Obermatt Value Rank of 22 (worse than 78% compared with alternatives), Descartes Systems shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators where three out of four are below average for Descartes Systems. Only the Price-to-Book Capital ratio (also referred to as market-to-book ratio) indicates good stock value with a Price-to-Book Rank of 54, which means that the stock price is lower compared with invested capital than for 54% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 9 which means the stock price compared with what market professionals expect for future profits is higher than 91% of comparable companies, indicating a low value concerning Descartes Systems's revenue levels. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Book Rank of 54 and for the dividend yields rank which is lower than for 99% of comparable companies, making the stock more expensive as regards to with the company's expected dividend payouts. ...read more

RECOMMENDATION: The overall picture with a consolidated Value Rank of 22, is a sell recommendation based on Descartes Systems's stock price compared with the company's operational size and dividend yields. Why are market participants paying such a high price for Descartes Systems, where three out of four value indicators are below par? One reason could be that the company is well financed, indicated by the high book capital level, and has a promising future that is not yet visible in reported revenues and profits. That would also explain the low dividend yield because the company needs the cash to invest in its future. If investors can verify a picture in this sense, the stock may still be a good investment, even though current company-reported financials don't fully explain current stock prices. We recommend further analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks, including the 360° View, before making an investment decision, which is essential in this case, as the financial indicators are inconclusive. ...read more

VALUE METRICS	2021	2022	2023	2024
PRICE VS. REVENUES (P/S)
PRICE VS. REVENUES (P/S)	22	9	10	9
PRICE VS. PROFITS (P/E)
PRICE VS. PROFITS (P/E)	41	32	34	30
PRICE VS. CAPITAL (Market-to-Book)
PRICE VS. CAPITAL (Market-to-Book)	29	45	36	54
DIVIDEND YIELD
DIVIDEND YIELD	1	1	1	1
CONSOLIDATED RANK: VALUE
CONSOLIDATED RANK: VALUE	16	11	21	22

Last update of Value Rank: 19-Dec-2024. Stock analysis on value ratios: The higher the rank, the lower the value ratio of Descartes Systems; except for dividend yield where the rank is higher, the higher the yield.

Growth Metrics in Detail

ANALYSIS: With an Obermatt Growth Rank of 72 (better than 72% compared with alternatives), Descartes Systems shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Descartes Systems. Profit Growth has a rank of 69, which means that currently professionals expect the company to grow its profits more than 69% of its competitors. This is a good sign for shareholders, which is confirmed by an above-average Stock Returns rank of 86 (above 86% of alternative investments). But Sales Growth has a below the median rank of 47, which means that, currently, professionals expect the company to grow less than 53% of its competitors, and Capital Growth also has a lower rank of 46. ...read more

RECOMMENDATION: The overall picture with a consolidated Growth Rank of 72, is a buy recommendation for growth and momentum investors. Because revenues and invested capital are the more solid growth indicators, the positive development on the profit side is less relevant. It may have been caused by cost-cutting, which may be a negative growth indicator. Finally, the above-average stock returns recently are a thing of the past and not a good indicator of future returns. Investors should be confident that the cost-cutting initiative leading to higher profits is to benefit the company's future. If not, there is little growth momentum, and investment is only advisable if the Value Ranks suggest a good investment timing for Descartes Systems. While momentum is a popular investment factor, the value aspect might be the more important one, in the longer term. We recommend analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks to arrive at a 360° View of the stock purchase case, especially since the growth performance is mixed here. ...read more

GROWTH METRICS	2021	2022	2023	2024
REVENUE GROWTH
REVENUE GROWTH	53	39	48	47
PROFIT GROWTH
PROFIT GROWTH	68	80	29	69
CAPITAL GROWTH
CAPITAL GROWTH	n/a	19	64	46
STOCK RETURNS
STOCK RETURNS	71	85	43	86
CONSOLIDATED RANK: GROWTH
CONSOLIDATED RANK: GROWTH	86	61	51	72

Last update of Growth Rank: 19-Dec-2024. Stock analysis on growth metrics: The higher the rank, the higher the growth and returns of Descartes Systems.

Safety Metrics in Detail

ANALYSIS: With an Obermatt Safety Rank of 95 (better than 95% compared with alternatives) for 2024, the company Descartes Systems has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Descartes Systems is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above average for Descartes Systems. Leverage is at a rank of 100, meaning the company has a below-average debt-to-equity ratio. It has less debt than 100% of its competitors. Liquidity is also good at a rank of 95, meaning the company generates more profit to service its debt than 95% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 20, which means that the portion of the debt that is about to be refinanced is above-average. It has more debt in the refinancing stage than 80% of its competitors. ...read more

RECOMMENDATION: With a consolidated Safety Rank of 95 (better than 95% compared with alternatives), Descartes Systems has a financing structure that is significantly safer than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for Descartes Systems. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. Investors may have a short-term debt challenge with Descartes Systems and should also compare Obermatt’s Value, Growth, and Sentiment Ranks before making a decision. ...read more

SAFETY METRICS	2021	2022	2023	2024
LEVERAGE
LEVERAGE	31	100	100	100
REFINANCING
REFINANCING	50	19	31	20
LIQUIDITY
LIQUIDITY	54	84	98	95
CONSOLIDATED RANK: SAFETY
CONSOLIDATED RANK: SAFETY	51	85	100	95

Last update of Safety Rank: 19-Dec-2024. Stock analysis on safety metrics: The higher the rank, the lower the leverage of Descartes Systems and the more cash is available to service its debt.

Sentiment Metrics in Detail

SENTIMENT	2021	2022	2023	2024
ANALYST OPINIONS
ANALYST OPINIONS	n/a	14	34	^new
OPINIONS CHANGE
OPINIONS CHANGE	n/a	50	50	^new
PRO HOLDINGS
PRO HOLDINGS	n/a	47	56	^new
MARKET PULSE
MARKET PULSE	n/a	98	80	^new
CONSOLIDATED RANK: SENTIMENT
CONSOLIDATED RANK: SENTIMENT	n/a	63	61	^new

Last update of Sentiment Rank: 19-Dec-2024. Stock analysis on sentiment metrics: The higher the rank, the more positive the sentiment for Descartes Systems.
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