Is Descartes Stock Still Attractive After 6.5% Rally Despite Ongoing Volatility in 2025?

So you are looking at Descartes Systems Group, wondering whether to stick with the stock, take some profits, or maybe get in on a new opportunity. Over the past week, Descartes rebounded with a 6.5% gain, offering a glimmer of optimism after a rougher patch in market sentiment. Zooming out, though, the recent month was tough, with shares down 8.4%, and year-to-date returns still sit at -16.9%. But here is the twist: despite a 5.2% drop over the past year, Descartes still boasts a 46.9% return over three years, and an impressive 84.6% over five years. That kind of long-term performance stands out, even if it has been a choppy ride lately.

The past few months have seen shifts in tech sector risk appetite and logistical stocks like Descartes have not been immune. Investors seem to be recalibrating not only for macroeconomic changes but also for shifting expectations around growth and supply chain technologies. Still, among valuation models, Descartes scores a 1 out of 6 for being undervalued based on commonly used metrics, suggesting it clears only one value hurdle at the moment.

So, what is driving these valuation results, and which methods give us the clearest view? In the next section, we will dig into the main ways analysts judge whether Descartes is fairly priced, undervalued, or not, before wrapping up with a smarter way to think about valuation altogether.

Descartes Systems Group scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Descartes Systems Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting its future free cash flows and then discounting those values back to present day, reflecting the time value of money. For Descartes Systems Group, analysts have run a 2 Stage Free Cash Flow to Equity model. This approach takes the company's current Free Cash Flow of $231 million and uses analyst estimates for the next five years. Cash flows are projected out even further using a reasonable growth rate for the broader timeframe.

According to these projections, Descartes's Free Cash Flow is expected to grow steadily, reaching about $494 million by 2035 based on analyst estimates and subsequent extrapolations. All values are in reporting currency dollars ($). By discounting these future cash flows to today's value, the DCF model estimates an intrinsic value for the stock of $124.96 per share.

When this intrinsic value is compared to the current market price, the analysis finds Descartes is trading at an 8.7% premium. This means the stock is slightly overvalued according to this model.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Descartes Systems Group.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Descartes Systems Group's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Descartes Systems Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a go-to valuation tool for profitable software companies like Descartes Systems Group because it directly connects market price to actual earnings power. A higher PE can signal optimism about future growth, whereas a lower PE might reflect concerns around risks, slower growth, or broader market sentiment. What counts as a “fair” PE depends greatly on how fast the company is expected to grow and how certain those earnings are.

Descartes currently trades at a PE ratio of 56.4x. That puts it right in line with the software industry average of 56.4x but noticeably below the peer group average of 95.1x. This may seem reasonable, but digging deeper, context matters. That is where the Simply Wall St “Fair Ratio” becomes especially useful. The Fair Ratio, calculated to be 34.0x for Descartes, incorporates the company's expected earnings growth, market cap, risk factors, and profit margins. This approach paints a much clearer and more tailored picture of what PE multiple the business deserves today.

Unlike a broad industry or peer comparison, the Fair Ratio zeroes in on Descartes’s unique story. In this case, Descartes’s actual PE of 56.4x stands significantly above its Fair Ratio of 34.0x. That suggests the stock is priced for much stronger growth or superior quality than underlying fundamentals alone support.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Descartes Systems Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, powerful tool that lets you connect your view of a company's story, including its future prospects, risks, and opportunities, with tailored financial forecasts like revenue growth, earnings, and margins. This approach helps you arrive at your own fair value estimate.

By linking the “why” behind a business’s growth to your numbers, Narratives make it easier to see whether the stock’s current price is in line with your expectations. On Simply Wall St’s Community page, used by millions of investors, anyone can create a Narrative for Descartes Systems Group and instantly compare their resulting Fair Value to the current share price. This makes buy and sell decisions more transparent and personalized.

Narratives update automatically as new events such as news, earnings releases, or product launches enter the market, so your expectations and valuations always reflect the latest information. For example, one investor might see Descartes as poised for rapid expansion into new markets, justifying a bullish fair value near CA$174.72. Another might focus on risks from acquisition reliance and competitive threats, yielding a more cautious fair value around CA$131.08. Narratives empower you to invest with confidence, backed by your own informed perspective.

Do you think there's more to the story for Descartes Systems Group? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com