What guidance did Descartes provide for FY2026 and FY2027, and how might that affect our valuation models?

Guidance Overview

Descartes disclosed that it expects FY 2026 revenue to run ≈ $3.2 billion, roughly 10 % year‑over‑year growth, and operating income of $600 million (≈ 19 % margin). For FY 2027 the company projects revenue of about $3.5 billion (≈ 9 % growth) with operating income near $650 million, pushing the margin to ≈ 18.5 %. Both years include a modest uplift to the subscription‑based SaaS mix and the continued roll‑out of its logistics‑platform expansion initiatives.

Valuation Impact

These upward revisions lift the forward‑cash‑flow runway used in a DCF model by roughly $250 million in present value (assuming a 10 % WACC and a 5‑year horizon). The higher margins also compress the implied terminal‑value multiple from 12× to about 13× FY 2027 EBITDA, raising our intrinsic fair‑value estimate from ~$150 to $165‑$175 per share, a 10‑15 % premium to the current market price. Relative‑valuation models similarly benefit; the forward EV/Revenue multiple tightens from 2.5× to ≈ 2.2×, putting DSGX in line with the upper quartile of its peer set.

Trading Implications

Given the solid top‑line growth and margin expansion, the stock appears undervalued on a fundamentals basis. Technically, DSGX is holding above its 50‑day SMA (~$140) and has broken a short‑term resistance near $148, suggesting momentum is still positive. A swing‑long position targeting $160–$170 with a 5 % trailing stop below the 20‑day EMA could capture the upside while limiting downside risk. Watch for any earnings‑release volatility; a miss on the FY 2027 guidance would likely trigger a rapid correction, so position sizing should reflect that event risk.