Converge Technology Solutions Corp CTSDF

Ink Research

[retiredcf]

Morning Report: Insiders buy where growth and value converge 

December 7, 2023

We return to Converge Technology Solutions (CTS) which provides IT & cloud solutions including advanced aalytics, cloud platforms, cybersecurity, and digital infrastructure to a range of clients in the public and private sectors. The stock has more than doubled since we highlighted it here on April 28, 2020, but is well off its 2021 high of $13.09. The stock is down 16.5% over the past year, but it appears to be gaining some upward momentum, advancing 15% over the past six months. The move higher may be in response to the company's potential growth prospects.

On November 14th, Converge reported Q3 revenue of $710.1 million, up from $514.5 million in Q3 2022. It reported a net loss for the quarter of $3.3 million versus net income of $18.2 million in the comparable period. Converge highlighted Q3 gross profit of $174.1 million and adjusted EBITDA of $41.3 million, up 25% and 33% from Q3 2022 respectively. At Q3 end, Converge had a bookings backlog of $479 million, up $32 million from Q2 end. For Q4, it expects gross profit from $177 to $184 million and adjusted EBITDA from $45 to $47 million.

Insiders have spent $358,051 picking up shares in the public market over the past six months with the most recent purchase coming on Tuesday. The buying comes as Converge has also been buying back shares. Meanwhile, the stock is trading at a trailing 12-months price-to-sales ratio of about 0.3, well below the sector average of about 4.3.