National Bank Financial has initiated coverage on Descartes (NASDAQ:DSGX) Systems Group (DSG: CN) (NASDAQ: DSGX), setting an Outperform rating with a price target of $125.00.
The new rating is based on a multi-stage discounted cash flow (DCF) analysis that incorporates expectations of both organic growth and strategic mergers and acquisitions (M&A).
The analysis by National Bank Financial anticipates a 10-15% EBITDA growth for Descartes Systems (TSX:DSG) over a 10-year horizon, with a 3% terminal growth rate and a 7-8% discount rate.
Descartes Systems operates within the logistics industry, providing a range of software and services solutions that enable transportation companies to manage routing, tracking, and quoting for shipments. The company also facilitates communication between relevant parties and addresses complex tariff and compliance issues.
National Bank Financial highlights Descartes Systems' distinction from other supply chain companies due to its focus on growth through acquisitions. Described as a premium consolidator within Canada, Descartes has demonstrated a consistent ability to acquire and integrate businesses effectively, which has driven substantial increases in revenue, profitability, and free cash flow.
Over the past decade, Descartes Systems has achieved significant financial milestones, including tripling its revenue and multiplying its adjusted EBITDA by five. This financial performance has contributed to an increase of more than 800% in the company's stock price, underlining the effectiveness of its growth strategy.
The Outperform rating and price target reflect confidence in the company's continued success in expanding its market presence and financial achievements.
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