Last Update 25 Feb 26

DSG: Freight Recovery Signals And Buyback Program Will Drive Future Upside

Analysts have trimmed their average price target on Descartes Systems Group by CA$20, citing sector wide target resets and a more cautious read on transport and software conditions, even as some see an improving setup for the company.

Analyst Commentary

Recent research on Descartes Systems Group shows a split view, with some analysts becoming more constructive on the stock while others reset expectations in light of sector headwinds and transport data.

Bullish Takeaways

Bullish analysts see Descartes as approaching an inflection point, pointing to what they describe as underlying growth reaccelerating and arguing that this could support better execution on its software portfolio over time.
They highlight that valuation is near multi year lows, which they view as creating a potentially more attractive entry point if the company can deliver on its growth plans.
Some research points to a more favorable setup for software into 2026, with stable macro and IT spending conditions and a sector that is currently out of favor. Bullish analysts think this could provide upside if sentiment improves.
Truckload spot rates are cited as having materially outperformed normal seasonality for several weeks, which bullish analysts read as an early positive sign for transport exposed software names such as Descartes.

Bearish Takeaways

Bearish analysts have cut price targets by CA$20 or more, reflecting a reset in expectations for both the software group and transport oriented names, and a more cautious stance on how quickly sentiment may improve.
They point to a prolonged muted freight cycle, with the ISM manufacturing index below 50 for 36 of the past 38 months and less than truckload tonnage negative year over year for 22 of the past 23 months. They see this as a constraint on near term growth for Descartes customers.
Target reductions, including moves from about US$112 to US$102 and a slight trim from US$106 to US$105, suggest concerns that prior valuation levels implied a faster growth or margin trajectory than what current conditions support.
Cautious analysts argue that even with a constructive long term view on software, sector wide resets and transport softness increase execution risk. As a result, they prefer to factor in a wider range of possible outcomes for Descartes in their models.

What's in the News

Announced a share repurchase program for up to 8,568,582 shares, or 9.96% of issued share capital, with repurchased shares to be cancelled following Toronto Stock Exchange approval. The program term runs up to December 10, 2026, based on 85,986,823 shares outstanding as of November 30, 2025 (company buyback announcement).
The Board of Directors authorized a new share buyback plan on December 3, 2025, which set the groundwork for the current repurchase program (company board announcement).
Showcased a wide set of AI and automation updates at Manifest 2026 in Las Vegas, including AI driven trade intelligence, denied party screening, document automation, and transportation visibility tools that use the Global Logistics Network to support compliance, risk management, and operational efficiency (product announcement at Manifest 2026).
Expanded client use cases with Supergasbras in Brazil, where Descartes' cloud based route planning and fleet management solution is being used across more than 400 trucks and over 400,000 tons of LPG transported per month. The solution integrates with billing and enterprise systems to support end to end route planning and execution (client announcement with Supergasbras).

Valuation Changes

Fair Value: CA$134.07 is unchanged, indicating no shift in the central valuation estimate used in this model.
Discount Rate: The discount rate has fallen slightly from 7.62% to 7.59%, a modest adjustment to the risk assumption applied to future cash flows.
Revenue Growth: The revenue growth assumption remains effectively unchanged at 10.81%, keeping the same top line growth outlook in the model.
Net Profit Margin: The net profit margin assumption is steady at 27.75%, with only a very small technical adjustment that does not alter the earnings profile used.
Future P/E: The future P/E multiple has eased slightly from 40.36x to 39.89x, implying a marginally lower valuation multiple applied to projected earnings.

Growing global trade complexity and e-commerce expansion are driving strong demand for Descartes' compliance and inventory management solutions, boosting recurring revenue and cross-selling potential.
Digital transformation, high recurring revenue, and strategic acquisitions strengthen customer loyalty, improve margins, and position Descartes for sustainable long-term growth.
Reliance on acquisitions, global trade uncertainty, sector weaknesses, competitive pressures, and regulatory complexity threaten stable growth, profitability, and market share.

Catalysts

About Descartes Systems Group

Provides global logistics technology solutions worldwide.What are the underlying business or industry changes driving this perspective?

Heightened global trade complexity and rapid regulatory changes-including new tariffs, elimination of de minimis import exceptions in the US, and shifting international trade agreements-are driving sustained demand for Descartes' advanced global trade intelligence, customs, and compliance platforms, which is expected to boost recurring services revenue and underpin organic growth.
The surge in e-commerce and the growing need for inventory visibility across omnichannel retail are accelerating adoption of Descartes' e-commerce-focused inventory management solutions, further reinforced by recent acquisitions like Finale Inventory and Sellercloud, positioning the company for stronger cross-sell and up-sell opportunities that support future revenue expansion and higher deal sizes.
Ongoing digital transformation and automation initiatives in transportation and supply chain sectors, combined with Descartes' leadership in real-time shipment tracking (MacroPoint) and AI-driven optimization, are enhancing customer stickiness and differentiation, likely supporting net margin expansion and increasing share in flat or declining end-markets.
Descartes' high recurring revenue model-evidenced by robust subscription revenue even when transactional volumes were depressed-provides predictable, stable cash flows; as macro uncertainty diminishes and freight volumes rebound, this model should translate into accelerated revenue growth and margin leverage.
Active and disciplined M&A strategy, enabled by a strong cash position and limited competition from private equity, allows Descartes to acquire niche technologies and new customer bases at attractive multiples, leading to incremental revenue, long-term margin improvement, and sustainable EPS growth.

Descartes Systems Group Earnings and Revenue Growth

Descartes Systems Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Descartes Systems Group's revenue will grow by 10.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 21.7% today to 26.7% in 3 years time.
Analysts expect earnings to reach $240.4 million (and earnings per share of $2.74) by about September 2028, up from $144.8 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 49.2x on those 2028 earnings, down from 58.9x today. This future PE is lower than the current PE for the US Software industry at 66.1x.
Analysts expect the number of shares outstanding to grow by 0.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.45%, as per the Simply Wall St company report.

Descartes Systems Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sustained uncertainty and volatility in global trade policy and tariffs may lead to unpredictable shipping volumes and cautious customer behavior, creating ongoing revenue fluctuations and limiting organic growth, especially in transactional services (likely to impact revenue and earnings stability).
Organic service revenue growth remains relatively modest (around 4%), while much of the reported growth is driven by acquisitions, indicating that a slowdown or poor integration of acquisitions could significantly curtail top-line growth and EBITDA expansion (impacting revenue and earnings).
Prolonged periods of depressed or stagnant transportation and logistics volumes, especially in core markets like U.S. domestic trucking, could dampen transactional revenue even as Descartes wins market share, risking revenue stagnation if underlying sector weaknesses persist (affecting recurring revenue and cash flows).
Rising competition from both established logistics technology providers and new entrants leveraging AI and cloud, including tech giants and startups, could erode Descartes' market share or put pricing pressure on its offerings, squeezing net margins and profitability.
Heightened regulatory and compliance complexity, including increased cybersecurity risks and rapidly shifting cross-border logistics regulations, may add to operating costs and liability exposure, potentially reducing net margins and increasing the risk of revenue disruption if customers delay adoption or switch solutions.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$152.9 for Descartes Systems Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$174.72, and the most bearish reporting a price target of just CA$131.08.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $899.6 million, earnings will come to $240.4 million, and it would be trading on a PE ratio of 49.2x, assuming you use a discount rate of 7.4%.
Given the current share price of CA$137.2, the analyst price target of CA$152.9 is 10.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Descartes Systems Group?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Global Trade Evolution And E-Commerce Adoption Will Open New Horizons