DSG.TO
DESCARTES SYSClosedDSG.TO discounted cash flow valuation
DSG.TO Fair Value
Reverse DCF: today's price implies 5.2% a year of FCF growth for years 1–5, against 14.6% in this model.
Model: 14.6% from analyst next-year EPS & revenue growth. Fades linearly to terminal growth by year 10.
Model: 7.72% (CAPM, see the build-up).
Long-run growth after year 10; keep it at or below nominal GDP.
Value Bridge
| PV of free cash flow, years 1–10 | CAD 5.56B |
|---|---|
| PV of terminal value (67% of EV) | CAD 11.13B |
| Enterprise value | CAD 16.69B |
| + Cash & investments | CAD 570.24M |
| − Total debt | −CAD 10.72M |
| Equity value | CAD 17.25B |
| ÷ Shares outstanding | 85.55M |
| Value per share | CAD 201.60 |
| Market cap | CAD 10.33B |
USD statements converted at 1.422 CAD.
Discount Rate Build-up
| Risk-free rate (10-yr Treasury) | 5.22% |
|---|---|
| Beta (clamped 0.5–2.5) | 0.50 |
| Equity risk premium | 5.00% |
| Cost of equity (CAPM) | 7.72% |
| Pre-tax cost of debt | 12.00% |
| Tax rate | 24.6% |
| Debt / (equity + debt) | 0.1% |
| WACC | 7.72% |
Cost of debt is interest expense ÷ total debt, held between the risk-free rate and 12%.
Free Cash Flow: History and Projection
Sensitivity: Value per Share
| WACC ↓ / g → | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |
|---|---|---|---|---|---|
| 5.72% | 265.25 | 294.73 | 333.35 | 386.18 | 462.78 |
| 6.72% | 212.05 | 229.80 | 251.75 | 279.60 | 316.08 |
| 7.72% | 176.13 | 187.75 | 201.60 | 218.37 | 239.11 |
| 8.72% | 150.29 | 158.35 | 167.71 | 178.70 | 191.79 |
| 9.72% | 130.84 | 136.68 | 143.32 | 150.95 | 159.81 |
Green is above today's price, red below (full colour at ±30%). The outlined centre cell is the current inputs.
Projected Cash Flows
| Year | Growth | Free cash flow | Discount factor | Present value |
|---|---|---|---|---|
| Base (TTM) | — | CAD 424.44M | — | — |
| Year 1 | 14.6% | CAD 486.41M | 0.928 | CAD 451.55M |
| Year 2 | 14.6% | CAD 557.43M | 0.862 | CAD 480.39M |
| Year 3 | 14.6% | CAD 638.81M | 0.800 | CAD 511.08M |
| Year 4 | 14.6% | CAD 732.08M | 0.743 | CAD 543.72M |
| Year 5 | 14.6% | CAD 838.96M | 0.689 | CAD 578.44M |
| Year 6 | 12.2% | CAD 941.15M | 0.640 | CAD 602.39M |
| Year 7 | 9.8% | CAD 1.03B | 0.594 | CAD 613.80M |
| Year 8 | 7.3% | CAD 1.11B | 0.552 | CAD 611.64M |
| Year 9 | 4.9% | CAD 1.16B | 0.512 | CAD 595.74M |
| Year 10 | 2.5% | CAD 1.19B | 0.475 | CAD 566.87M |
Method
Two-stage free-cash-flow model, the same as the bot's lgf dcf: five years at the chosen growth rate, a straight-line fade to terminal growth by year ten, then a Gordon-growth terminal value. Everything is discounted at WACC.
Base cash flow is the trailing four quarters of operating cash flow minus capital expenditure (the latest fiscal year when quarters are missing). Default growth uses analyst long-term growth when Yahoo publishes it, else the average of next year's EPS and revenue growth, else revenue CAGR, held between −5% and 25%.
A DCF is only as good as its inputs. The terminal value is usually most of the answer, so read the sensitivity grid before the headline number. This is a model, not investment advice.