Stock Analysis

Is It Too Late To Consider Buying The Descartes Systems Group Inc (TSE:DSG)?

TSX:DSG
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The Descartes Systems Group Inc (TSE:DSG), might not be a large cap stock, but it led the TSX gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Descartes Systems Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Descartes Systems Group

What is Descartes Systems Group worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.80% above my intrinsic value, which means if you buy Descartes Systems Group today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth CA$84.47, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Descartes Systems Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Descartes Systems Group generate?

earnings-and-revenue-growth
TSX:DSG Earnings and Revenue Growth August 20th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 79% over the next couple of years, the future seems bright for Descartes Systems Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in DSG’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on DSG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of 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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