Assessing Descartes Systems Group (TSX:DSG)’s Valuation After New Buyback Plan and Earnings Growth

Descartes Systems Group (TSX:DSG) just paired a fresh earnings beat with a sizeable share repurchase plan, aiming to cancel up to roughly 10% of its stock over the next year.

See our latest analysis for Descartes Systems Group.

The new repurchase plan and solid quarterly numbers come after a choppy run for the stock, with a 1 month share price return of 6.55% but a year to date share price decline of 23.77%. At the same time, the 3 year total shareholder return of 32.71% and 5 year total shareholder return of 58.99% show that, despite the recent 1 year total shareholder return of negative 27.00%, long term holders are still comfortably ahead and will be watching to see if this buyback marks a turning point in momentum.

If you like the Descartes story but want a few more ideas in the same space, this could be a good time to explore high growth tech and AI stocks.

With double digit earnings growth, a modest discount to analyst targets and a near 10% buyback in play, the key question is whether Descartes is quietly undervalued or if the market is already pricing in its next leg of growth.

Most Popular Narrative: 5.5% Undervalued

With Descartes Systems Group closing at CA$124.65 against a narrative fair value of CA$131.93, the story frames modest upside built on compounding fundamentals.

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 and are likely supporting net margin expansion and increasing share in flat or declining end markets.

Read the complete narrative.

Want to see what kind of growth trajectory and margin expansion could underpin that premium earnings multiple and still imply upside from here? The full narrative reveals the playbook.

Result: Fair Value of CA$131.93 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained weakness in freight volumes or a stumble in integrating acquisitions could quickly cap organic growth and challenge today’s premium valuation assumptions.

Find out about the key risks to this Descartes Systems Group narrative.

Another Angle on Valuation

On a straightforward price-to-earnings view, Descartes looks richer than it first appears, trading at 50.1 times earnings versus a fair ratio of 31.2 times and slightly above the Canadian software average of 49.4 times. This suggests there may be less room for error than the DCF implies.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Descartes Systems Group Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom narrative in minutes: Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Descartes Systems Group.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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