TSX:CTS - Post Discussion
Post by
retiredcf on Jul 19, 2023 12:26pm
Explanation
You mentioned in one response to a question on Converge Technology Solutions that the net debt is $320M but said that it has a healthy balance sheet in another response. Is the debt a concern? Small revenue growth is expected over the next few years but strong earnings growth is expected after this year. This appears to be a contradiction - could you elaborate? Also it was made clear that a long time frame is needed. -------------------------------------------------------------------------------------------
Net debt relative to its EBITDA and equity balance are fairly high, but there are other components to its balance sheet that we like (good cash balance of $139M on a $707M market cap, low levels of long-term debt as its net debt is primarily made up of accounts payable, and a good equity position of $633M on a market cap of $707M).
Analysts expect revenue to grow between 4% to 6% annually over the next few years, but earnings are expected to grow 23% and 43% beginning one year from now, indicating profit margin expansion. Sales and earnings growth can differ, and this is merely a reflection of expectations for profit margins (cutting costs, maintaining costs, etc.).
Generally we refer to a long timeframe as 3-5 years or more. (5iResearch)
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