This Is the Best Overlooked AI Stock on the TSX Today

This AI stock has been a top growing in the last while, but remains overlooked despite its strong portfolio and solid finances.

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Artificial intelligence (AI) stocks continue to pick up steam. Yet, when you’re looking for the best AI stocks, it can be quite difficult to find ones that still hold value. However, in the case of Descartes Systems Group (TSX:DSG), this company remains overlooked.

Today, let’s get into why investors might want to consider this overlooked stock on the TSX today.

A strong position

Descartes stock is a leading provider of logistics and supply chain management solutions. The company leverages AI and machine learning to optimize routes, manage inventory, and improve supply chain visibility. As global supply chains become increasingly complex, the demand for AI-driven logistics solutions is growing, positioning Descartes well for continued growth.

Furthermore, the AI stock has a track record of consistent financial performance. It has steady revenue growth, profitability, and strong cash flow generation. This financial stability provides a solid foundation for ongoing investment in AI technologies and research and development, ensuring the company remains a leader in its field.

This financial stability is supported by a robust client base. The AI stock serves a diverse and global client base, including some of the world’s largest logistics companies. This extensive customer network not only provides a steady revenue stream but also offers opportunities for cross-selling and up-selling new AI-driven products and services.

Proof is in the earnings

During the company’s full-year 2024 report, the AI stock saw its shares climb even higher. Proving that the AI stock could just be getting started. Descartes stock reported revenues of $572.9 million for FY24, an 18% increase from the $486.0 million in FY23. This robust growth is a significant positive indicator for investors.

Furthermore, services revenues, which comprise 91% of total revenues, grew by 20% from $435.7 million in FY23 to $520.9 million in FY24. This shows strong demand for Descartes’s core offerings. Particularly in logistics and supply chain management solutions, which are increasingly leveraging AI technologies.

The company also saw improving profitability metrics. This included reported income from operations of $142.8 million for FY24, a 10% increase from $130.4 million in FY23. For the fourth quarter (Q4) of FY24, income from operations was $37.0 million, up 10% from Q4FY23 and 14% from the previous quarter. 

The AI stock also reported that cash provided by operating activities increased by 8% from $192.4 million in FY23 to $207.7 million in FY24. This strong cash flow supports further investments in AI and other growth initiatives.

Overall, a positive outlook

This AI stock could just be getting started. Even with shares up about 26% in the last year as of writing. Descartes’s chief executive officer highlighted how their Global Logistics Network helps clients navigate the complexities of global trade. This includes military conflicts and shipping route disruptions. This adaptability and reliability enhance customer trust, leading to increased business.

Furthermore, the AI stock’s ability to retain and expand its customer base, even amidst global challenges, underscores its value proposition and competitive advantage. And as its acquisitions continue to be seamlessly integrated, there is even more growth to look forward to. So, as Descartes stock continues to see consistent revenue growth and profits, it’s certainly a strong AI stock to consider on the TSX today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Descartes Systems Group. The Motley Fool has a disclosure policy.

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