It’s common for many investors, especially those inexperienced, to buy shares in companies with good stories, even if those companies are losing money. At times, these stories cloud investors’ minds, causing them to invest with emotion rather than sound company fundamentals. While a well-funded company may lose money for years, it ultimately needs to generate profits or investors will move on and the company will die.
Despite the era of blue sky investing in tech stocks, many investors still employ a more traditional strategy; buying stocks of profitable companies such as Converged Technology Solutions (TSE: CTS). While profit is not the only metric that should be considered when investing, it is worth recognizing businesses that can consistently generate profits.
View our latest analysis for Converge Technology Solutions
Converge Technology Solutions Improves Profits
Over the past three years, Converge Technology Solutions’ earnings per share have grown substantially. So much so that these three-year growth rates wouldn’t be a fair assessment of the company’s future. Therefore, it is best to isolate last year’s growth rate for analysis. Over the past 12 months, Converge Technology Solutions’ EPS has grown in an impressive fashion from C$0.045 to C$0.10. The 124% year-over-year increase is certainly something to watch. Best case? The business has reached a real inflection point.
Careful consideration of revenue growth and earnings before interest and tax (EBIT) margins helps to understand the sustainability of near-term profit growth. Converge Technology Solutions’ EBIT margin remained stable last year, while revenue rose 78% to C$2.0b. This is progress.
In the chart below, you can see how the company has increased revenue and revenue over time. For more detailed information, click on the image.
You don’t stare in the rearview mirror while driving, so you might be more interested in this one free Report shows analyst forecasts for Converge Technology Solutions future profit.
Are Converge Technology Solutions insiders aligned with all shareholders?
Investors have been looking for a vote of confidence in the companies they hold, and insider buying is one of the key indicators of market optimism. Because often, buying a stock is a sign that the buyer thinks it’s undervalued. Of course, we can never determine what insiders think, we can only judge their actions.
What’s really shocking is that insiders at Converge Technology Solutions spent a staggering C$2.1 million acquiring stock in just one year, without selling any during that time. Knowing this, Converge Technology Solutions will have their eyes on them, anticipating what to expect in the near future. It’s also worth noting that CEO and director Shaun Maine made the largest single acquisition at C$7.08 per share, valued at C$1.3 million.
Aside from insider buyouts, another encouraging sign for Converge Technology Solutions is the sizeable stake insiders as a whole. Taken as a whole, with stock worth up to C$70 million, insiders have a good grasp of the company’s success. This shows that the goals of shareholders and management are aligned.
While insiders already own a lot of stock, and they’ve been buying more, the good news for common shareholders doesn’t stop there. That’s because, according to our analysis, CEO Shaun Maine’s compensation is less than the median for a similarly sized company. Companies of a similar size to Converge Technology Solutions with market capitalizations between C$528 million and C$210 million had a median total CEO compensation of about C$2.1 million.
The CEO of Converge Technology Solutions received just $987,000 in total compensation for the year ending December 2021. This looks like a modest compensation package and may imply some kind of respect for shareholder interests. The level of CEO compensation is not the most important measure for investors, but when compensation is modest, it does support greater alignment between CEOs and common shareholders. In a broader sense, it can also be a sign of a culture of integrity.
Are Converge Technology Solutions Worth Your Attention?
Converge Technology Solutions’ earnings have taken off in impressive fashion. Equally exciting; insiders all own and are buying more shares. These factors seem to point to the company’s potential and that it has reached an inflection point. We recommend Converge Technology Solutions near the top of your watchlist. You still need to be aware of risks such as – Converge Technology Solutions 1 warning sign We think you should know.
The good news is that Converge Technology Solutions isn’t the only growth stock with insider buying. Here’s their list…with insider purchases in the past three months!
Please note that insider trading discussed in this article refers to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based solely on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to provide financial advice. It does not constitute advice to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to bring you long-term focused analytics driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Wall Street has no positions in any of the stocks mentioned.
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