Converge Technology Solutions (CTS.TO) Buy,…

Converge Technology Solutions (CTS.TO)

5.99

-0.00 (0.00%)

as of Apr 23, 2025, 8:00:00 pm Market Open.

65 watching

BUY

Owns shares in the company and thinks will perform well.
Rolling up software consulting companies into one.
Cheap on financial metrics.
Good time to buy shares in the company.
Take over bid would result in value for shareholders.
Good long term prospects.

BUY

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.

Recent selloff an overreaction; most companies are happy to have higher credit lines regardless of what else is going on.
They provide flexibility of course.
We think $8.50 to $9.50 would be an acceptable price for buyer and seller.
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TOP PICK

IT provider currently going through strategic review process.
Special committee meeting to determine sale of company.
Share price @$6 & sale of company would fetch $9.
Believes company can double in the next few years.

DON'T BUY

Doesn't follow this much, but it's an M&A consolidator of IT service providers across North America and Europe. Are in a low-margin business, 5% EBITDA margin. Half of sales are hardware, the other half selling 3rd-party software. Also offering higher-margin ongoing services. Shares have been decimated, because the market didn't see synergies after acquisitions.

BUY ON WEAKNESS

$8.35 is his target. They're in a crowded space: IT service provider with some blockchain solutions and analytics. They have bought 35 companies in the last 5 years to grow. They're a mini-Constellation. He follows it. Buy at $4.20-4.60.

HOLD

End-to-end IT service providers. Regionally focused. (Analysts’ price target is $6.00)

DON'T BUY

It is a growth by acquisition story but these are low margin companies that they are trying to consolidate. It is hard to see where the value added play is.

TOP PICK

IT services that integrates small and medium sized business. Growing aggressively through acquisition and organic opportunities. Expanding geographically and vertically within industry. Trading at 7.5x next times EBITA. Expecting further stock growth.

COMMENT

Lots of players in the space. A sizeable company. New solutions on blockchain. Interesting company. (Analysts’ price target is $9.45)

TOP PICK

They move small/mid-sized businesses into the cloud. Since 2017, they've been growing organically and by 30 acquisitions. They cross-sell and increase the customer base. They are expanding into Europe, most recently buying a company in the UK. Compounded EBITDA growth is 70% and revenue growth is around 50% compounded over the last 3 years. It trades at only 5.5x 2023's EBITDA vs. peers of 8.5-10.5x. He recently re-entered the stock. (Analysts’ price target is $10.31)

BUY

Likes it. Regionally focused. Well run. Very good at what they do. Proven themselves. From here, almost a double to the price target. (Analysts’ price target is $9.50)

TOP PICK

It is in the IT services industry focused on mid market customers in North America and Europe. It is growing very quickly so he is puzzled why the stock is so low. It has delivered on its acquisition plans and has provided solid organic growth. We should see more acquisitions and an increase in credit facilities and maybe even a dividend or buyback of shares with its free cash flow. It is growing 2 times as fast as its peers but trading at half the valuation. Buy 10, Hold 2, Sell 0 (Analysts’ price target is $11.73)

PAST TOP PICK

(A Top Pick Jul 12/21, Down 36%) They do IT outsourcing for small/medium business. CTS buys new companies and increase cross-selling by introducing new services, especially high-margin managed services rather than selling hardware. EBITDA margins should increase from 5% to 10% in the next few years. Still early days in its strategy.

BUY

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Quarter was good. Revenue grew 77%, beat estimates by 10% and EPS more than doubled to 8 cents, beating estimates by 25%. The company made five acquisitions year to date and organic growth was decent at 7%. Cash flow conversion was strong at 82%. Backlog looked healthy and showed good growth. Gross margins came down slightly, but management expects them to rise in the next quarter due to more software sales expected. Management also noted improvements on the supply chain side with regards to hardware deliverables from 4-6 months to 2-3 months (normally 4-6 weeks). Overall, CTS is well-positioned. No major concerns about the quarter. Negative momentum on the stock is more market-related than company-specific. Unlock Premium - Try 5i Free

PAST TOP PICK

(A Top Pick May 11/21, Up 27%) Management team executing very well. Expecting the company to grow organically and through M&A. Once interest rates & market volatility reduces, expecting stock price to rise.

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