Stock Analysis

What Does The Descartes Systems Group Inc's (TSE:DSG) Share Price Indicate?

TSX:DSG
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The Descartes Systems Group Inc (TSE:DSG), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the TSX. 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. But what if there is still an opportunity to buy? 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

Is Descartes Systems Group still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.85% 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 the company’s true value is CA$99.07, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Descartes Systems Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Descartes Systems Group?

earnings-and-revenue-growth
TSX:DSG Earnings and Revenue Growth November 21st 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Descartes Systems Group's earnings over the next few years are expected to increase by 80%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

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 track record of its management team. 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 an eye on DSG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

If you'd like to know more about Descartes Systems Group as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign 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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