Review of Descartes Systems Group Inc

JUL 31, 2025 - DSG is a software provider targeting logistics intensive customers. The recent uncertainty around trade has put some pressure on DSG’s customers’ near-term growth prospects. However, given the critical nature of the solutions, DSG’s management sees a limited negative effect on the company’s overall business. DSG’s business continues to experience a long-term tailwind due to the rise of e-commerce. DSG’s solutions have many attractive characteristics of a great business, including a high degree of recurring revenue, strong pricing power, low capital expenditure and high switching costs. The company has been quite consistent in its ability to execute an acquisitive growth playbook by targeting companies with similar economics. In fact, the company has demonstrated a track record of allocating capital by consistently growing sales and earnings by double digits over the years. A meaningful portion of DSG’s premium valuation was driven by the expectation that they can continue to execute this growth playbook in the foreseeable future, which we think is highly likely. We are maintaining our rating at “A-”.