Intrinsic value of The Descartes Systems Group Inc. - DSGX

Previous Close

$37.98

  Intrinsic Value

$7.86

stock screener

  Rating & Target

str. sell

-79%

Previous close

$37.98

 
Intrinsic value

$7.86

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of DSGX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.50
  15.35
  14.32
  13.38
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
Revenue, $m
  276
  318
  364
  413
  465
  519
  577
  638
  701
  767
  837
  909
  984
  1,061
  1,142
  1,227
  1,314
  1,405
  1,499
  1,598
  1,700
  1,806
  1,917
  2,033
  2,153
  2,278
  2,409
  2,546
  2,688
  2,837
Variable operating expenses, $m
  225
  252
  280
  311
  343
  378
  414
  451
  491
  533
  523
  568
  615
  664
  714
  767
  822
  878
  938
  999
  1,063
  1,129
  1,199
  1,271
  1,346
  1,424
  1,506
  1,592
  1,681
  1,774
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  225
  252
  280
  311
  343
  378
  414
  451
  491
  533
  523
  568
  615
  664
  714
  767
  822
  878
  938
  999
  1,063
  1,129
  1,199
  1,271
  1,346
  1,424
  1,506
  1,592
  1,681
  1,774
Operating income, $m
  51
  67
  84
  102
  121
  142
  163
  186
  210
  235
  314
  341
  369
  398
  428
  460
  493
  527
  562
  599
  637
  677
  719
  762
  807
  854
  903
  954
  1,008
  1,063
EBITDA, $m
  126
  145
  166
  188
  212
  237
  263
  291
  320
  350
  381
  414
  448
  484
  521
  559
  599
  640
  683
  728
  775
  823
  874
  926
  981
  1,038
  1,098
  1,160
  1,225
  1,293
Interest expense (income), $m
  0
  3
  4
  6
  7
  9
  11
  13
  15
  18
  20
  22
  25
  28
  30
  33
  36
  40
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
Earnings before tax, $m
  48
  62
  78
  95
  112
  131
  150
  171
  192
  215
  291
  316
  341
  367
  395
  423
  453
  484
  516
  549
  584
  620
  657
  696
  737
  780
  824
  870
  919
  969
Tax expense, $m
  13
  17
  21
  26
  30
  35
  41
  46
  52
  58
  79
  85
  92
  99
  107
  114
  122
  131
  139
  148
  158
  167
  177
  188
  199
  211
  223
  235
  248
  262
Net income, $m
  35
  46
  57
  69
  82
  95
  110
  125
  140
  157
  213
  230
  249
  268
  288
  309
  331
  353
  377
  401
  426
  452
  480
  508
  538
  569
  602
  635
  671
  708

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  729
  840
  961
  1,089
  1,226
  1,370
  1,523
  1,683
  1,850
  2,025
  2,207
  2,397
  2,595
  2,801
  3,014
  3,236
  3,467
  3,707
  3,956
  4,216
  4,485
  4,766
  5,058
  5,363
  5,680
  6,011
  6,356
  6,717
  7,093
  7,486
Adjusted assets (=assets-cash), $m
  729
  840
  961
  1,089
  1,226
  1,370
  1,523
  1,683
  1,850
  2,025
  2,207
  2,397
  2,595
  2,801
  3,014
  3,236
  3,467
  3,707
  3,956
  4,216
  4,485
  4,766
  5,058
  5,363
  5,680
  6,011
  6,356
  6,717
  7,093
  7,486
Revenue / Adjusted assets
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
Average production assets, $m
  286
  330
  378
  428
  482
  539
  598
  661
  727
  796
  868
  942
  1,020
  1,101
  1,185
  1,272
  1,363
  1,457
  1,555
  1,657
  1,763
  1,873
  1,988
  2,108
  2,232
  2,363
  2,498
  2,640
  2,788
  2,942
Working capital, $m
  -33
  -38
  -43
  -49
  -55
  -61
  -68
  -75
  -83
  -91
  -99
  -107
  -116
  -125
  -135
  -145
  -155
  -166
  -177
  -189
  -201
  -213
  -226
  -240
  -254
  -269
  -284
  -300
  -317
  -335
Total debt, $m
  58
  81
  105
  131
  159
  188
  219
  251
  285
  320
  357
  395
  435
  477
  520
  565
  611
  660
  710
  763
  817
  874
  933
  994
  1,058
  1,125
  1,195
  1,268
  1,344
  1,423
Total liabilities, $m
  147
  170
  194
  220
  248
  277
  308
  340
  374
  409
  446
  484
  524
  566
  609
  654
  700
  749
  799
  852
  906
  963
  1,022
  1,083
  1,147
  1,214
  1,284
  1,357
  1,433
  1,512
Total equity, $m
  581
  671
  767
  869
  978
  1,094
  1,215
  1,343
  1,476
  1,616
  1,761
  1,913
  2,071
  2,235
  2,405
  2,583
  2,767
  2,958
  3,157
  3,364
  3,579
  3,803
  4,037
  4,280
  4,533
  4,797
  5,072
  5,360
  5,660
  5,974
Total liabilities and equity, $m
  728
  841
  961
  1,089
  1,226
  1,371
  1,523
  1,683
  1,850
  2,025
  2,207
  2,397
  2,595
  2,801
  3,014
  3,237
  3,467
  3,707
  3,956
  4,216
  4,485
  4,766
  5,059
  5,363
  5,680
  6,011
  6,356
  6,717
  7,093
  7,486
Debt-to-equity ratio
  0.100
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
Adjusted equity ratio
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798
  0.798

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  35
  46
  57
  69
  82
  95
  110
  125
  140
  157
  213
  230
  249
  268
  288
  309
  331
  353
  377
  401
  426
  452
  480
  508
  538
  569
  602
  635
  671
  708
Depreciation, amort., depletion, $m
  75
  79
  82
  86
  90
  95
  100
  104
  110
  115
  68
  74
  80
  86
  93
  99
  106
  114
  121
  129
  138
  146
  155
  165
  174
  185
  195
  206
  218
  230
Funds from operations, $m
  110
  124
  139
  155
  172
  190
  209
  229
  250
  272
  280
  304
  329
  354
  381
  408
  437
  467
  498
  530
  564
  599
  635
  673
  713
  754
  797
  842
  888
  937
Change in working capital, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
Cash from operations, $m
  115
  129
  145
  161
  178
  197
  216
  236
  258
  280
  288
  312
  337
  363
  390
  418
  447
  478
  509
  542
  576
  611
  648
  687
  727
  769
  812
  858
  905
  955
Maintenance CAPEX, $m
  -19
  -22
  -26
  -29
  -33
  -38
  -42
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -86
  -93
  -99
  -106
  -114
  -121
  -129
  -138
  -146
  -155
  -165
  -174
  -185
  -195
  -206
  -218
New CAPEX, $m
  -41
  -44
  -47
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -115
  -120
  -125
  -130
  -136
  -142
  -148
  -154
Cash from investing activities, $m
  -60
  -66
  -73
  -80
  -87
  -95
  -102
  -110
  -118
  -126
  -134
  -143
  -152
  -161
  -170
  -180
  -190
  -200
  -212
  -223
  -235
  -248
  -261
  -275
  -290
  -304
  -321
  -337
  -354
  -372
Free cash flow, $m
  55
  63
  72
  81
  91
  102
  114
  127
  140
  154
  155
  170
  186
  203
  220
  238
  257
  277
  297
  319
  340
  363
  387
  412
  437
  464
  492
  521
  551
  583
Issuance/(repayment) of debt, $m
  21
  23
  24
  26
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  79
Issuance/(repurchase) of shares, $m
  47
  44
  39
  34
  27
  20
  12
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  68
  67
  63
  60
  55
  49
  43
  35
  34
  35
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  79
Total cash flow (excl. dividends), $m
  124
  129
  135
  141
  146
  151
  157
  162
  174
  189
  191
  208
  226
  244
  264
  283
  304
  325
  348
  371
  395
  420
  446
  473
  502
  531
  562
  594
  627
  662
Retained Cash Flow (-), $m
  -83
  -89
  -96
  -103
  -109
  -115
  -122
  -128
  -134
  -140
  -146
  -152
  -158
  -164
  -171
  -177
  -184
  -191
  -199
  -207
  -215
  -224
  -233
  -243
  -253
  -264
  -275
  -288
  -300
  -314
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  41
  40
  39
  38
  37
  36
  35
  34
  40
  50
  46
  57
  68
  80
  93
  106
  120
  134
  149
  164
  180
  196
  213
  230
  248
  267
  286
  306
  327
  348
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  39
  37
  34
  31
  29
  26
  24
  21
  23
  26
  22
  24
  26
  27
  27
  27
  26
  25
  23
  21
  19
  16
  14
  12
  10
  8
  6
  5
  4
  3
Current shareholders' claim on cash, %
  98.4
  97.2
  96.2
  95.5
  95.0
  94.7
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5
  94.5

Descartes Systems Group Inc (Descartes) is a Canada-based global provider of federated network and global logistics technology solutions that help its customers make and receive shipments and manage related resources. Its network-based solutions, which primarily consist of services and software, connect people to their trading partners and enable business document exchange (bookings, bills of lading, status messages); regulatory compliance and customs filing; route and resource planning, execution and monitoring; access and leverage global trade and restricted party data; inventory and asset visibility; rate and transportation management, and warehouse operations. Its solutions include Logistics Technology Platform that fuses the Descartes Global Logistics Network (Descartes GLN); customs and regulatory compliance; routing, mobile and telematics; global logistics network services; transportation management, and broker and forwarder enterprise systems. It operates through MacroPoint.

FINANCIAL RATIOS  of  The Descartes Systems Group Inc. (DSGX)

Valuation Ratios
P/E Ratio 120.1
Price to Sales 14.1
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow 39.5
Price to Free Cash Flow 42.4
Growth Rates
Sales Growth Rate 10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.2%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 5.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 72.5%
Gross Margin - 3 Yr. Avg. 70.4%
EBITDA Margin 32.4%
EBITDA Margin - 3 Yr. Avg. 30.4%
Operating Margin 15.2%
Oper. Margin - 3 Yr. Avg. 14.6%
Pre-Tax Margin 15.7%
Pre-Tax Margin - 3 Yr. Avg. 14.6%
Net Profit Margin 11.8%
Net Profit Margin - 3 Yr. Avg. 10.6%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 0%

DSGX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DSGX stock intrinsic value calculation we used $237 million for the last fiscal year's total revenue generated by The Descartes Systems Group Inc.. The default revenue input number comes from 0001 income statement of The Descartes Systems Group Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DSGX stock valuation model: a) initial revenue growth rate of 16.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DSGX is calculated based on our internal credit rating of The Descartes Systems Group Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of The Descartes Systems Group Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DSGX stock the variable cost ratio is equal to 84.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DSGX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7% for The Descartes Systems Group Inc..

Corporate tax rate of 27% is the nominal tax rate for The Descartes Systems Group Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DSGX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DSGX are equal to 103.7%.

Life of production assets of 12.8 years is the average useful life of capital assets used in The Descartes Systems Group Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DSGX is equal to -11.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $498.812 million for The Descartes Systems Group Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 77.275 million for The Descartes Systems Group Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of The Descartes Systems Group Inc. at the current share price and the inputted number of shares is $2.9 billion.

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