Converge Technology (CTS) turns Corner but still looking back

 Converge Technology(CTS) has been on my radar screen for about 5 years.5 years ago the stock price was below $5 and stayed there until 2020.The price rose to as high as $12.50 in 2020 before dropping to it's present price of about $5 a share.This,of course, was partly caused because the Covid restrictions put a damper on sales.Investors were expecting quite substantial revenue and earnings growth.Revenues met expectations but earnings growth was a little slower.Still analysts forecasted quarterly e.p.s. of $.21 to $.46 with the consensus being $.32 per share.  Their P/E ratio as well as their stock price was lowered but only slightly.Now it is about 25 times earnings.So it seemed to many shareholders that Converge Technology was on track.But then management announced that they are having a Strategic Review of all their options.This amounts to putting a For Sale sign on CTS.According to this blog this was a very bad time to think of "folding up the tents" as the future looks at least somewhat rosy.As 2021 was the first year in 5 that CTS showed a profit.

     Q2 and Q3 look better than Q1

   The last 4 years have  shown negative net income but this fiscal year is looking better.One of the problems that CTS faces is a quite esoteric market;it sells things like sotware enabled IT and cloud solutions and digital infrastructure.Most analysts don't know much about these things and can't easily predict the amount of future growth.But all forecasts are rosy for both Q2 and Q3.This blog is predicting  Q2 and Q3 e.p.s. of $.30 and $.40.Annual e.p.s. could be as high as $1.25 to $1.40 and with a P/E ratio of  4-5 the share price might be able to reach  $5-$5.50 in early 2023 even allowing for a slowdown in the IT and cloud solution narkets.CTS has had a togh time for the last 4 years but the future does like brighter.If it insists in puting a For Sale sign up then it is likely that the price has just gone up.

                                   

 Dale Mcintyre (M.S.Sc(econ) is a freelance writer that wotks mainly for Zacks Research and Market Beat.com https://www.zacks.com/