On Friday, RBC Capital adjusted its outlook on Descartes (NASDAQ:DSGX) Systems Group Inc. (NASDAQ:DSGX) shares, increasing the price target to $115 from the previous $110 while retaining an Outperform rating on the stock. The adjustment comes as Descartes prepares to report its first-quarter results and reflects recent strategic acquisitions.
The firm's analyst noted the deployment of $151 million in capital for the acquisitions of OCR and ASD, anticipating that these moves will likely result in second-quarter earnings surpassing consensus expectations.
The analyst also forecasts Descartes to deliver strong first-quarter performance with adjusted EBITDA growing 18% year-over-year, which is slightly above the consensus.
RBC Capital expects the company's valuation to potentially continue its upward trend, supported by sustained organic growth rates that exceed historical averages. The firm's positive outlook on Descartes is underpinned by the company's strategic expansion and solid financial performance.
Descartes, known for its logistics and supply chain management software, has been actively pursuing growth through acquisitions, which is reflected in the increased capital deployment. The market is now watching closely as the company approaches its earnings report, with RBC Capital's revised target suggesting confidence in Descartes' growth trajectory.
InvestingPro Insights
As Descartes Systems Group Inc. (NASDAQ:DSGX) gears up for its earnings report, a glance at real-time data from InvestingPro reveals a compelling financial landscape. The company boasts a robust gross profit margin of 75.86% for the last twelve months as of Q4 2024, underscoring the efficiency of its operations. The market has responded positively, with the stock delivering a strong return of 31.84% over the past year, and currently trading near its 52-week high at 98.65% of the peak value.
InvestingPro Tips highlight that while Descartes trades at a high earnings multiple with a P/E ratio of 72.75, it also operates with a moderate level of debt, which may offer a degree of financial stability. Additionally, the company's liquid assets surpass its short-term obligations, suggesting a solid position to meet its immediate financial commitments.
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