Converge Technology Solutions Corp T.CTS

Ink Research

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Morning Report: Converge Technology Solutions rises towards the top 

March 18, 2024

Converge Technology Solutions (CTS) continues to grab our attention based on multiple measures. As of March 15th, it is the second-best performing stock in the INK Canadian Insider Index since the quarterly rebalancing on February 16th. That was the day it joined the index, and it has since rallied 26.2%. CTS is also up 46.7% since we last highlighted it here on December 7, 2023. Its strong price momentum and continued insider buying have helped the stock take the #9 spot in our March Top 40 Report which we published today.

The stock initially sagged after our December morning report, but it started to climb again on January 30th when it jumped 13.0% after it provided a Q4 update. CTS advised that it expected to generate between $109.0 and $116.0 million in cash from operating activities for the quarter which would be more than 2.5 times Q4 2022 cash flow of $30.4 million. When it reported Q4 results on March 6th, cash from operating activities came in at $114.5 million. Revenue was $651.1 million, up 1.6%, from a year earlier. With more than 60 offices located throughout North America and Europe, CTS targets mid-market companies across sectors with hybrid IT support and an emerging digital transactions software service. Currently, its hybrid support segment is the largest part of its business, delivering just over $646 million in revenue in Q2. The segment helps its customers procure and integrate technology into their businesses. Given the rapid technological developments in areas such as AI, data management, and cloud computing, CTS believes it can offer value by helping its customers reduce the amount spent on expensive in-house IT capacity. In contrast to many US-listed tech companies, CTS insiders have not been selling as the stock made new highs this month. In fact, we have even seen a bit of buying.