Value
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.8 |
| P/S | 5.0 |
| EV/EBITDA | 1.7 |
| Fwd P/E | 6.2 |
| PEG | 5.7 |
| Analyst target | 9.0 |
- ▸Forward P/E: 20.8x
- ▸PEG: 1.32
DSGX · Why this verdict
Why The Descartes Systems Group (DSGX) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Descartes is a high-quality software business with excellent cash conversion and pristine balance-sheet strength, but four consecutive earnings misses and a confirmed price downtrend mean the fundamental case has not yet translated into a recoverable technical setup — patience is warranted until price stabilizes.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business converts net income into free cash flow at 152%, with gross and operating margins of 23% and a perfect Piotroski F-Score of 9/9, marking it as an operationally sound franchise. A Rule of 40 score of 50 further confirms the balance between growth and profitability. Quality breakdown | Free cash flow conversion stays above 120% and operating margins remain at or above 20% over the next four quarters. | →Stable |
| CounterStrong margins have not prevented four consecutive earnings misses; if the gap between accounting income and actual earnings power is structural rather than timing-related, the cash-quality premium may be overstated. | ||
With roughly 21% headroom to the analyst consensus price target and a PEG ratio of 1.32, the stock appears attractively priced relative to its growth rate — the risk/reward is approximately 2.2-to-1 in your favor if the downtrend resolves. Bull case | Price advances toward the analyst consensus target, closing at least half the current gap within 12 months. | →Stable |
| CounterAnalyst targets have not been revised down to reflect four consecutive misses; if consensus estimates fall further, the apparent upside gap will shrink or disappear even without a change in the stock price. | ||
The company has missed earnings estimates in each of the last four quarters, with the average shortfall running nearly 10% below consensus — a pattern that has depressed sentiment and removed near-term catalysts for re-rating. Earnings | The miss streak breaks: the company reports an earnings result at or above consensus for at least one of the next two quarters. | →Stable |
| CounterIf underlying demand or pricing is genuinely weakening, the miss streak may extend further, compressing the valuation multiple despite otherwise sound fundamentals. | ||
The stock trades below its 200-day moving average with the average itself declining at roughly 5% over the past 30 days, and volume is distributing rather than accumulating — indicating that sellers remain in control. Momentum breakdown | Price reclaims the 200-day moving average and holds above it for at least 30 consecutive days, with OBV turning positive. | →Stable |
| CounterThe death-cross formation currently in place is a hard technical block; even if fundamentals stabilize, trapped overhead supply could cap any recovery rally well before the analyst price target is reached. | ||
The business converts net income into free cash flow at 152%, with gross and operating margins of 23% and a perfect Piotroski F-Score of 9/9, marking it as an operationally sound franchise. A Rule of 40 score of 50 further confirms the balance between growth and profitability.
→StableQuality breakdown
- Expectation
- Free cash flow conversion stays above 120% and operating margins remain at or above 20% over the next four quarters.
CounterStrong margins have not prevented four consecutive earnings misses; if the gap between accounting income and actual earnings power is structural rather than timing-related, the cash-quality premium may be overstated.
With roughly 21% headroom to the analyst consensus price target and a PEG ratio of 1.32, the stock appears attractively priced relative to its growth rate — the risk/reward is approximately 2.2-to-1 in your favor if the downtrend resolves.
→StableBull case
- Expectation
- Price advances toward the analyst consensus target, closing at least half the current gap within 12 months.
CounterAnalyst targets have not been revised down to reflect four consecutive misses; if consensus estimates fall further, the apparent upside gap will shrink or disappear even without a change in the stock price.
The company has missed earnings estimates in each of the last four quarters, with the average shortfall running nearly 10% below consensus — a pattern that has depressed sentiment and removed near-term catalysts for re-rating.
→StableEarnings
- Expectation
- The miss streak breaks: the company reports an earnings result at or above consensus for at least one of the next two quarters.
CounterIf underlying demand or pricing is genuinely weakening, the miss streak may extend further, compressing the valuation multiple despite otherwise sound fundamentals.
The stock trades below its 200-day moving average with the average itself declining at roughly 5% over the past 30 days, and volume is distributing rather than accumulating — indicating that sellers remain in control.
→StableMomentum breakdown
- Expectation
- Price reclaims the 200-day moving average and holds above it for at least 30 consecutive days, with OBV turning positive.
CounterThe death-cross formation currently in place is a hard technical block; even if fundamentals stabilize, trapped overhead supply could cap any recovery rally well before the analyst price target is reached.
Per-dimension breakdown
Quality
8.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.8 |
| ROA | 5.4 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 7.1 |
| FCF quality | 10.0 |
| Moat | 7.1 |
| Rule of 40 | 8.3 |
| Piotroski F | 10.0 |
- ▸Strong margins: 23%
- ▸Excellent cash conversion: 152% FCF/NI
- ▸Rule of 40: 50 (pass)
- ▸Strong Piotroski F-Score: 9/9
Growth
7.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.2 |
| EPS growth | 8.8 |
Momentum
2.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 1.0 |
| Volume | 0.0 |
- ▸Capitulation risk (RSI 14, below 200MA)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -5.4%/30d — confirmed downtrend
Sentiment
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.2 |
| Price target | 9.4 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 47%
Insider
5.0/10data confidence 50%Peer rank
5.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.6 |
| quality rank | 6.9 |
| growth rank | 5.1 |
- ▸Best-in-class margins
- ▸Conservative debt levels
Technical
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.9 |
| support resistance | 8.4 |
| 52w position | 1.6 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| days to cover | 6.8 |
| volatility | 2.9 |
| put call | 10.0 |
| implied vol | 5.0 |
| max pain risk | 3.0 |
| beta | 10.0 |
| debt equity | 8.0 |
- ▸Above max pain $60
Catalyst
2.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
- ▸Earnings concerns: 0B/4M
How the verdict was assembled
Engine trigger
Growth is cheap relative to earnings, but the technical setup has not yet produced a breakout above resistance (PEG 1.32, quality 8.2/10, growth 7.5/10). | News modifier -1 (STRONG_BUY_WAIT → HOLD_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_C2_GARP_WAIT|L3:NEWS_MOD=-1Passed (7)
- ASYMMETRY:3.6>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:69d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.8<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
3.65
Upside
+28.2%
Downside
7.7%
Sizing output
AVOID
SetupFALLING_KNIFE — Death cross, below all MAs, RSI 14, MACD bearish
EdgeTEMP_HEADWIND — High quality (8.2) with weak momentum (2.8)
SuitabilityMODERATE — Balanced profile
Investment implication
The C-path quality+growth combination triggered the HOLD_IF_HOLDING verdict: quality 8.2 and growth 7.5 both clear their thresholds, with asymmetric R:R of 3.65 supporting the read.
The strongest dimensions are Quality at 8.2, Growth at 7.5, and Sentiment at 7.3; the weakest are Catalyst at 2.5, Momentum at 2.8, and Insider at 5.0. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 3.65 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The business converts net income into free cash flow at 152%, with gross and operating margins of 23% and a perfect Piotroski F-Score of 9/9, marking it as an operationally sound franchise. A Rule of 40 score of 50 further confirms the balance between growth and profitability.
Trip ifFree cash flow conversion falls below 100% of net income for 2 consecutive quarters.
- P2The company has missed earnings estimates in each of the last four quarters, with the average shortfall running nearly 10% below consensus — a pattern that has depressed sentiment and removed near-term catalysts for re-rating.
Trip ifEPS surprise stays below 0% for 2 more consecutive quarters (extending the miss streak to 6).
- P3The stock trades below its 200-day moving average with the average itself declining at roughly 5% over the past 30 days, and volume is distributing rather than accumulating — indicating that sellers remain in control.
Trip ifThe 200-day moving-average slope falls below -8% over any 30-day window.
- P4With roughly 21% headroom to the analyst consensus price target and a PEG ratio of 1.32, the stock appears attractively priced relative to its growth rate — the risk/reward is approximately 2.2-to-1 in your favor if the downtrend resolves.
Trip ifAnalyst consensus price target falls below $78 (erasing more than half the current upside gap).