Is Now The Time To Look At Buying Converge Technology Solutions Corp. (TSE:CTS)?

While Converge Technology Solutions Corp. (TSE:CTS) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the TSX. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Converge Technology Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Converge Technology Solutions

Is Converge Technology Solutions Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Converge Technology Solutions’s ratio of 27.08x is trading in-line with its industry peers’ ratio, which means if you buy Converge Technology Solutions today, you’d be paying a relatively sensible price for it. Is there another opportunity to buy low in the future? Since Converge Technology Solutions’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Converge Technology Solutions look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Converge Technology Solutions' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CTS’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CTS? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CTS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CTS, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Converge Technology Solutions at this point in time. Every company has risks, and we've spotted 1 warning sign for Converge Technology Solutions you should know about.

If you are no longer interested in Converge Technology Solutions, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.