Converge Technology Solutions Corp (CTS.CA) Stock Fundamental Analysis
TSX:CTS - Toronto Stock Exchange - CA21250C1068 - Common Stock - Currency: CAD
CTS gets a fundamental rating of 5 out of 10. The analysis compared the fundamentals against 12 industry peers in the IT Services industry. Both the profitability and the financial health of CTS get a neutral evaluation. Nothing too spectacular is happening here. CTS is valued quite cheap, while showing a decent growth score. This is a good combination!
1. Profitability
1.1 Basic Checks
CTS had positive earnings in the past year.
In the past year CTS had a positive cash flow from operations.
In multiple years CTS reported negative net income over the last 5 years.
CTS had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
The Return On Assets of CTS (-8.13%) is better than 66.67% of its industry peers.
Looking at the Return On Equity, with a value of -49.54%, CTS is in line with its industry, outperforming 58.33% of the companies in the same industry.
CTS has a Return On Invested Capital of 5.10%. This is amongst the best in the industry. CTS outperforms 83.33% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for CTS is significantly below the industry average of 178.11%.
The last Return On Invested Capital (5.10%) for CTS is above the 3 year average (4.32%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | -8.13% | ||
| ROE | -49.54% | ||
| ROIC | 5.1% |
ROA(3y)-2.33%
ROA(5y)-1.28%
ROE(3y)-15.08%
ROE(5y)-9.35%
ROIC(3y)4.32%
ROIC(5y)6.82%
1.3 Margins
CTS's Operating Margin of 2.35% is fine compared to the rest of the industry. CTS outperforms 75.00% of its industry peers.
CTS's Operating Margin has improved in the last couple of years.
With a Gross Margin value of 26.68%, CTS perfoms like the industry average, outperforming 41.67% of the companies in the same industry.
CTS's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 2.35% | ||
| PM (TTM) | N/A | ||
| GM | 26.68% |
OM growth 3Y-11.63%
OM growth 5Y6.89%
PM growth 3YN/A
PM growth 5YN/A
GM growth 3Y5.64%
GM growth 5Y2.57%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), CTS is destroying value.
Compared to 1 year ago, CTS has less shares outstanding
CTS has more shares outstanding than it did 5 years ago.
Compared to 1 year ago, CTS has an improved debt to assets ratio.
2.2 Solvency
CTS has an Altman-Z score of 1.45. This is a bad value and indicates that CTS is not financially healthy and even has some risk of bankruptcy.
Looking at the Altman-Z score, with a value of 1.45, CTS is in the better half of the industry, outperforming 75.00% of the companies in the same industry.
CTS has a debt to FCF ratio of 1.13. This is a very positive value and a sign of high solvency as it would only need 1.13 years to pay back of all of its debts.
With an excellent Debt to FCF ratio value of 1.13, CTS belongs to the best of the industry, outperforming 91.67% of the companies in the same industry.
A Debt/Equity ratio of 0.80 indicates that CTS is somewhat dependend on debt financing.
CTS's Debt to Equity ratio of 0.80 is in line compared to the rest of the industry. CTS outperforms 50.00% of its industry peers.
Even though the debt/equity ratio score it not favorable for CTS, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.8 | ||
| Debt/FCF | 1.13 | ||
| Altman-Z | 1.45 |
ROIC/WACC0.65
WACC7.81%
2.3 Liquidity
A Current Ratio of 0.93 indicates that CTS may have some problems paying its short term obligations.
CTS has a worse Current ratio (0.93) than 66.67% of its industry peers.
CTS has a Quick Ratio of 0.93. This is a bad value and indicates that CTS is not financially healthy enough and could expect problems in meeting its short term obligations.
CTS has a Quick ratio of 0.89. This is in the lower half of the industry: CTS underperforms 66.67% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.93 | ||
| Quick Ratio | 0.89 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 22.64% over the past year.
Measured over the past years, CTS shows a very strong growth in Earnings Per Share. The EPS has been growing by 86.63% on average per year.
Looking at the last year, CTS shows a decrease in Revenue. The Revenue has decreased by -4.18% in the last year.
CTS shows a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 30.39% yearly.
EPS 1Y (TTM)22.64%
EPS 3Y86.63%
EPS 5YN/A
EPS Q2Q%21.05%
Revenue 1Y (TTM)-4.18%
Revenue growth 3Y19.27%
Revenue growth 5Y30.39%
Sales Q2Q%4.56%
3.2 Future
Based on estimates for the next years, CTS will show a quite strong growth in Earnings Per Share. The EPS will grow by 8.54% on average per year.
The Revenue is expected to grow by 2.44% on average over the next years.
EPS Next Y-3.97%
EPS Next 2Y3.29%
EPS Next 3Y8.54%
EPS Next 5YN/A
Revenue Next Year2.01%
Revenue Next 2Y3.48%
Revenue Next 3Y2.44%
Revenue Next 5YN/A
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 9.22, the valuation of CTS can be described as reasonable.
CTS's Price/Earnings ratio is rather cheap when compared to the industry. CTS is cheaper than 91.67% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 26.60. CTS is valued rather cheaply when compared to this.
Based on the Price/Forward Earnings ratio of 9.60, the valuation of CTS can be described as reasonable.
Based on the Price/Forward Earnings ratio, CTS is valued cheaply inside the industry as 91.67% of the companies are valued more expensively.
The average S&P500 Price/Forward Earnings ratio is at 22.39. CTS is valued rather cheaply when compared to this.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 9.22 | ||
| Fwd PE | 9.6 |
4.2 Price Multiples
CTS's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. CTS is cheaper than 91.67% of the companies in the same industry.
83.33% of the companies in the same industry are more expensive than CTS, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 4.23 | ||
| EV/EBITDA | 7.98 |
4.3 Compensation for Growth
CTS has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)N/A
PEG (5Y)N/A
EPS Next 2Y3.29%
EPS Next 3Y8.54%
5. Dividend
5.1 Amount
CTS has a Yearly Dividend Yield of 1.00%. Purely for dividend investing, there may be better candidates out there.
CTS's Dividend Yield is rather good when compared to the industry average which is at 0.41. CTS pays more dividend than 100.00% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, CTS's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1% |
5.2 History
CTS is new to the dividend game and has less than 3 years of track record.
Dividend Growth(5Y)N/A
Div Incr Years1
Div Non Decr Years1
5.3 Sustainability
CTS has negative earnings and hence a negative payout ratio. The dividend may be in danger.
DP-6.06%
EPS Next 2Y3.29%
EPS Next 3Y8.54%
Converge Technology Solutions Corp
TSX:CTS (4/23/2025, 7:00:00 PM)
5.99
0 (0%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners32.73%
Inst Owner ChangeN/A
Ins Owners5.89%
Ins Owner ChangeN/A
Market Cap1.13B
Analysts73.33
Price Target5.92 (-1.17%)
Short Float %N/A
Short RatioN/A
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1% |
Yearly Dividend0.05
Dividend Growth(5Y)N/A
DP-6.06%
Div Incr Years1
Div Non Decr Years1
Ex-DateN/A
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)48.7%
Min EPS beat(2)24.14%
Max EPS beat(2)73.27%
EPS beat(4)3
Avg EPS beat(4)29.84%
Min EPS beat(4)-14.02%
Max EPS beat(4)73.27%
EPS beat(8)6
Avg EPS beat(8)23.18%
EPS beat(12)10
Avg EPS beat(12)27.25%
EPS beat(16)10
Avg EPS beat(16)8.62%
Revenue beat(2)1
Avg Revenue beat(2)1.69%
Min Revenue beat(2)-1.98%
Max Revenue beat(2)5.36%
Revenue beat(4)2
Avg Revenue beat(4)-0.94%
Min Revenue beat(4)-7.62%
Max Revenue beat(4)5.36%
Revenue beat(8)5
Avg Revenue beat(8)1.15%
Revenue beat(12)7
Avg Revenue beat(12)-2.47%
Revenue beat(16)9
Avg Revenue beat(16)-1.7%
PT rev (1m)5.45%
PT rev (3m)17.6%
EPS NQ rev (1m)-10.96%
EPS NQ rev (3m)-11.37%
EPS NY rev (1m)-0.32%
EPS NY rev (3m)2.79%
Revenue NQ rev (1m)-0.08%
Revenue NQ rev (3m)0.42%
Revenue NY rev (1m)0.92%
Revenue NY rev (3m)1.11%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 9.22 | ||
| Fwd PE | 9.6 | ||
| P/S | 0.44 | ||
| P/FCF | 4.23 | ||
| P/OCF | 4.21 | ||
| P/B | 3.15 | ||
| P/tB | N/A | ||
| EV/EBITDA | 7.98 |
EPS(TTM)0.65
EY10.85%
EPS(NY)0.62
Fwd EY10.42%
FCF(TTM)1.41
FCFY23.62%
OCF(TTM)1.42
OCFY23.75%
SpS13.74
BVpS1.9
TBVpS-1.65
PEG (NY)N/A
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | -8.13% | ||
| ROE | -49.54% | ||
| ROCE | 7.08% | ||
| ROIC | 5.1% | ||
| ROICexc | 6.11% | ||
| ROICexgc | 90.81% | ||
| OM | 2.35% | ||
| PM (TTM) | N/A | ||
| GM | 26.68% | ||
| FCFM | 10.3% |
ROA(3y)-2.33%
ROA(5y)-1.28%
ROE(3y)-15.08%
ROE(5y)-9.35%
ROIC(3y)4.32%
ROIC(5y)6.82%
ROICexc(3y)5.23%
ROICexc(5y)10.33%
ROICexgc(3y)N/A
ROICexgc(5y)N/A
ROCE(3y)6%
ROCE(5y)9.47%
ROICexcg growth 3YN/A
ROICexcg growth 5YN/A
ROICexc growth 3Y-4.82%
ROICexc growth 5Y-27.87%
OM growth 3Y-11.63%
OM growth 5Y6.89%
PM growth 3YN/A
PM growth 5YN/A
GM growth 3Y5.64%
GM growth 5Y2.57%
F-Score5
Asset Turnover1.19
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.8 | ||
| Debt/FCF | 1.13 | ||
| Debt/EBITDA | 1.77 | ||
| Cap/Depr | 1.44% | ||
| Cap/Sales | 0.06% | ||
| Interest Coverage | 2.57 | ||
| Cash Conversion | 166.18% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.93 | ||
| Quick Ratio | 0.89 | ||
| Altman-Z | 1.45 |
F-Score5
WACC7.81%
ROIC/WACC0.65
Cap/Depr(3y)13.45%
Cap/Depr(5y)14.95%
Cap/Sales(3y)0.52%
Cap/Sales(5y)0.5%
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)22.64%
EPS 3Y86.63%
EPS 5YN/A
EPS Q2Q%21.05%
EPS Next Y-3.97%
EPS Next 2Y3.29%
EPS Next 3Y8.54%
EPS Next 5YN/A
Revenue 1Y (TTM)-4.18%
Revenue growth 3Y19.27%
Revenue growth 5Y30.39%
Sales Q2Q%4.56%
Revenue Next Year2.01%
Revenue Next 2Y3.48%
Revenue Next 3Y2.44%
Revenue Next 5YN/A
EBIT growth 1Y30.87%
EBIT growth 3Y5.4%
EBIT growth 5Y39.37%
EBIT Next Year259.93%
EBIT Next 3Y59.08%
EBIT Next 5YN/A
FCF growth 1Y22.02%
FCF growth 3Y48.95%
FCF growth 5Y60.56%
OCF growth 1Y16.89%
OCF growth 3Y45.52%
OCF growth 5Y58.51%