Descartes Systems Group Inc. (The) Common Stock (DSGX)

FairStock Score: 60/100 — STEADY

Key Financials

Strengths

• Generates $236 million in annual free cash flow (3.8% yield on market cap)
• Solid return on equity of 10.9% above cost of capital
• Conservative balance sheet with debt-to-equity of just 0.01, providing financial flexibility
• Altman Z-Score of 14.1 confirms minimal bankruptcy risk and strong solvency
• Revenue growth of 15.1% demonstrates strong top-line momentum

Concerns

• Trades significantly above Graham Number ($28) with negative 155% margin of safety—limited downside protection

AI Analysis

Descartes Systems Group Inc. (The) Common Stock is a small-cap technology company valued at $6.2 billion. The business generates $729 million in annual revenue with a 6.3% net margin and $236 million in free cash flow. From a quality standpoint, Descartes shows Altman Z-Score of 14.1 confirms fortress-level solvency and adequate 11% ROE. On valuation, the stock is trading at a premium 38.7x earnings, with trades far above its Graham Number ($28) with no margin of safety. Growth dynamics show revenue growing at 15.1% and profit growth of 22.0%. Our composite FairStock Score of 60/100 reflects above-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Descartes's 15% revenue growth trajectory could accelerate as it captures additional market share in the technology sector. With $236 million in annual free cash flow (3.8% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 39x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer