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Converge Technology Solutions Corp. (TSE:CTS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Converge Technology Solutions Corp., through its subsidiaries, distributes storage devices and systems, computer products, software, and peripherals. On 31 December 2020, the CA$1.1b market-cap company posted a loss of CA$4.2m for its most recent financial year. Many investors are wondering about the rate at which Converge Technology Solutions will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 9 of the Canadian IT analysts is that Converge Technology Solutions is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of CA$42m in 2021. The company is therefore projected to breakeven around a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 101% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Converge Technology Solutions given that this is a high-level summary, though, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Converge Technology Solutions currently has a debt-to-equity ratio of 137%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of Converge Technology Solutions to cover in one brief article, but the key fundamentals for the company can all be found in one place – Converge Technology Solutions' company page on Simply Wall St. We've also put together a list of important factors you should further research:
Valuation: What is Converge Technology Solutions worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Converge Technology Solutions is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Converge Technology Solutions’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
This article by Simply Wall St is general in nature. 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.
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