Descartes Systems Group Inc (NASDAQ: DSGX)

Sector: Technology Industry: Software - Application CIK: 0001050140
Market Cap 6.42 Bn
P/B 4.14
P/E 41.30
P/S 9.13
ROIC (Qtr) 9.72
Div Yield % 0.00
Rev 1y % (Qtr) 11.21
Total Debt (Qtr) 7.60 Mn
Debt/Equity (Qtr) 0.00

About

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 251.02M provides robust 33.02x coverage of total debt 7.60M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 278.79M provide 86.02x coverage of short-term debt 3.24M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 251.02M provides exceptional 259.59x coverage of interest expenses 967000, showing strong debt service capability.
  • Operating cash flow of 251.02M provides strong 12.46x coverage of stock compensation 20.15M, indicating sustainable incentive practices.
  • Strong tangible asset base of 453.52M provides 59.65x coverage of total debt 7.60M, indicating robust asset backing and low credit risk.

Bear case

  • Operating cash flow of 251.02M barely covers its investment activities of (161.74M), with a coverage ratio of -1.55, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (161.74M) provide weak support for R&D spending of 103.34M, which is -1.57x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 278.79M provide limited coverage of acquisition spending of (155.36M), which is -1.79x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 205.44M show weak coverage of depreciation charges of 85.63M, with a 2.40 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 244.64M represents just -6437.79x of debt issuance (38000), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Product and Service Breakdown of Revenue (2022)

Geographical Breakdown of Revenue (2022)

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 234.56 Bn 28.15 5.46 10.73 Bn
2 CRM Salesforce, Inc. 204.28 Bn 32.96 5.39 11.14 Bn
3 SHOP Shopify Inc. 169.36 Bn 95.09 15.83 1.12 Bn
4 UBER Uber Technologies, Inc 167.13 Bn 10.04 3.37 12.19 Bn
5 INTU Intuit Inc. 140.92 Bn 175.06 33.55 6.78 Bn
6 ADBE Adobe Inc. 124.98 Bn 17.53 5.26 6.65 Bn
7 NOW ServiceNow, Inc. 121.03 Bn 69.24 9.11 2.40 Bn
8 ADP Automatic Data Processing Inc 100.13 Bn 23.64 4.72 4.37 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.40 2.50
EV to Cash from Ops. EV/CFO 24.66 12.27
EV to Debt EV to Debt 814.33 50.31
EV to EBIT EV/EBIT 30.14 10.96
EV to EBITDA EV/EBITDA 21.82 16.84
EV to Free Cash Flow [EV/FCF] EV/FCF 25.31 14.08
EV to Market Cap EV to Market Cap 0.96 -118.20
EV to Revenue EV/Rev 8.80 4.45
Price to Book Value [P/B] P/B 4.14 4.27
Price to Earnings [P/E] P/E 41.30 -133.65
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -3.97
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 4.25
Dividend per Basic Share Div per Share (Qtr) 0.00 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.54
Interest Coverage Int. cover (Qtr) 212.45 -51.80
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -18.94 -210.77
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 53.79 9,906.83
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.62
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 12.77 -265.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 17.40 55.76
EBIT Growth (1y) % EBIT 1y % (Qtr) 11.58 -227.83
EBT Growth (1y) % EBT 1y % (Qtr) 11.73 -88.00
EPS Growth (1y) % EPS 1y % (Qtr) 11.73 121.91
FCF Growth (1y) % FCF 1y % (Qtr) 19.95 -40.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 13.41 92.11
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.39 0.58
Cash Payout Ratio Cash Payout Ratio 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 1.27 3.77
Current Ratio Curr Ratio (Qtr) 1.83 8.19
Debt to Equity Ratio Debt/Equity (Qtr) 0.00 0.16
Interest Cover Ratio Int Coverage (Qtr) 212.45 -51.80
Times Interest Earned Times Interest Earned (Qtr) 212.45 -51.80
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 41.40 -105.77
EBIT Margin % EBIT Margin % (Qtr) 29.19 -131.65
EBT Margin % EBT Margin % (Qtr) 29.06 -122.72
Gross Margin % Gross Margin % (Qtr) 76.80 58.14
Net Profit Margin % Net Margin % (Qtr) 22.10 -127.70