01:45 PM EDT, 04/11/2024 (MT Newswires) -- RBC hosted Descartes' management for several investor meetings. After the meetings, RBC says it has increased confidence in the likelihood that Descartes continues to compound capital at high rates. Analyst Paul Treiber sees sustained strong organic growth, a ramping pace of acquisitions, and potential upside to margins.

Key points:

Treiber believes investor visibility to Descartes' long-term shareholder value creation has improved, given:

1) organic growth has stabilized and appears to be strengthening; 2) contribution from acquisitions is starting to re-accelerate; and 3) further margin expansion appears likely. Descartes has averaged 19% adj. EBITDA CAGR over the last 10 years, exceeding its target for 10-15% per annum. Similar outperformance appears increasingly likely going forward.

Valuation appears likely to continue to re-rate higher, as organic growth is improving and M&A is likely to ramp in 2024, Treiber adds, noting that Descartes is trading at 27x FTM EV/EBITDA, below supply chain & fleet management peers (35x).

Maintain Outperform, US$110 target,

Price: 123.03, Change: +1.42, Percent Change: +1.17