Descartes Systems Is Perfectly Positioned for Post-Pandemic Supply Chain Problems (DSGX)
An Innovator from the Beginning
Descartes Systems Group (NASDAQ: DSGX) has been helping global multimodal supply chains since 1981. Based in Waterloo, Canada, DSGX didn’t go public until 1998 in Canada and 1999 in the US. That initial foray into the markets was just in time to catch the rising wave of the dotcom tsunami.
It was already a tech innovator when it came to the supply chain and logistics space. As a matter of fact, in 2001, it was a pioneer in switching from a direct sales model of its hardware to a subscription-based software model. Remember, companies like Adobe (NASDAQ: ADBE) and Microsoft (NASDAQ: MSFT) didn’t do that until nearly a decade later.
Source: Inbound Logistics
Also, that subscription model was less attractive then because networks weren’t as powerful and abundant as they are now. In the space where DSGX operated, those terminals were all generally operating off one network hub, so it wasn’t as flexible, but it didn’t have to be.
The larger point is, DSGX management had a good view of the future and saw that recurring revenue was the smart way to go. Its clients would value a subscription model since they weren’t running a variety of networks and didn’t need anything overly complex, at least in the early days.
Obviously, as technology improved, so did DSGX systems. Today, as you can see below, DSGX has a variety of divisions to help at all levels of supply chain and logistics management. Today, DSGX has more than 24,000 customers worldwide and generates more than $425 million in revenue annually.
Source: Descartes Systems Group
As you can see from the table below, it’s working with some of the biggest global companies out there. Even companies that you think are doing their own logistics operations, like XPO Logistics (NYSE:XPO), UPS (NYSE:UPS), FedEX (NYSE:FDX), and DHL, work with DSGX on a regular basis. These are just the customer highlights, given the long list of customers that DSGX has built over the decades.
Let’s Talk Outcome
The real story of this MegaTrend favorite is told with this price graph. DSGX stock has gained about 100% a year for the last decade, and this isn’t in some sexy sector like biotech, computer chips, or cybersecurity.
It’s getting packages from point A to point B, and that’s what is so compelling. To be able to come into a relatively stable industry where reliability and stability is more highly valued than whiz-bang tech and make this kind of impression isn’t typical of most firms in this space.
For the year-to-date, DSGX is still down nearly 12%, but the stock has gained more than 20% in the past three months. That is a powerful comeback, and that momentum is growing, not fading.
Look at the drop when the pandemic hit, and then look at how quickly it recovered and went to even higher highs. DSGX is still on sale. If you’re looking for a great growth stock for the long term that’s an overlapping play on a number of MegaTrends, look no further.
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