The value of tomorrow is achieved in partnership with Zonebourse.com
The Descartes Systems Group was born around forty years ago near Toronto. No particular link with France, except the homage of the founders to the philosopher and mathematician from Tours, promoter of logic and rationality. Based in Waterloo, Ontario, Descartes is a specialist in logistics software, the famous supply chain, to use the established anglicism. Its catalog includes solutions for planning carrier routes, managing stocks and warehouses, promoting business-to-business dialogue and optimizing commercial data.
From the first to the last mile
These tools are supposed to streamline both distant cross-border exchanges and the complex problem of the last mile. Customers – more than 24,000 worldwide – are divided into two main categories. On the one hand, logistics service operators, such as airlines, railways and road transport companies, or freight forwarders. On the other, producers, wholesalers, retailers and Internet commerce players. It goes without saying that the need for logistics optimization has exploded in recent years, with the proliferation of online commercial activity. The best e-commerce sites are those that are able to respond most quickly to the demand of consumers who are now accustomed to having their wishes fulfilled in record time.
The art of roll-up
Before becoming a “logical and rational” machine, Descartes came close to bankruptcy in the early 2000s with the explosion of the Internet bubble. Twenty years later, the Canadian group, which employs nearly 2,000 people, has become a model of meticulous management, after having been a precursor of software on demand, or SaaS, to improve its offer. Like many companies in the technology sector, it has deployed an aggressive acquisition policy, described as roll-up.
This practice consists of agglomeration of small companies which operate in identical, related or geographically complementary sectors, to grow quickly and offer an ever wider offer. A successful strategy since it allowed Descartes to become one of the world’s leading players in its specialty. It should be noted that shareholders have not been excessively solicited over the last ten years to build this building, despite two fundraising rounds. They have no reason to complain about the external growth policy, since the return on invested capital is completely satisfactory compared to the standards of the financial world.
Significant and recurring margins
The economic model, based on the cloud – cloud computing – is now well established. It delivers free cash flow that has grown constantly over the last ten years, with the exception of the slight contraction visible in 2018. Over the last financial year, which ended on March 31, Descartes generated a turnover of 486 million US dollars, for a net profit of 102 million dollars and a free cash flow of 186 million.
The status of a software publisher with high and recurring margins translates into a high valuation multiple based on net profit, but more affordable when considering free cash flow, which is an excellent marker of capacity. real ability of the company to generate cash. At the same time, the balance sheet is extremely solid, with a positive net cash position that has lasted for years, which means that cash on hand exceeds – largely, in this case – debts.
If the profit trajectory anticipated by analysts is confirmed and if Descartes continues to respect its business plan, investors have an interesting technological file. The United States does not have a monopoly on innovation success stories.