Celebrations may be in order for Converge Technology Solutions Corp. (CVE:CTS) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
After this upgrade, Converge Technology Solutions' six analysts are now forecasting revenues of CA$1.3b in 2021. This would be a sizeable 46% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting CA$0.33 in per-share earnings. Prior to this update, the analysts had been forecasting revenues of CA$1.2b and earnings per share (EPS) of CA$0.29 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 26% to CA$6.11 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Converge Technology Solutions at CA$6.75 per share, while the most bearish prices it at CA$4.90. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 46%, in line with its 55% annual growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 9.1% per year. So although Converge Technology Solutions is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Converge Technology Solutions could be worth investigating further.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential risk with Converge Technology Solutions, including major dilution from new stock issuance in the past year. For more information, you can click through to our platform to learn more about this and the 1 other risk we've identified .
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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