Converge Technology Solutions, Inc. (TSE:CTS) stock price rises 28%, but slows down due to insufficient growth

Converge Technology Solutions Co., Ltd. (TSE:CTS) stock continues its recent momentum, rising 28% in the last month alone. Looking back a little further, it's encouraging to see that the share price is up 41% in the last year.

Despite the solid rebound in prices, Converge remains You may find Technology Solutions an attractive investment. P/S ratio 0.4 times. However, it is unwise to take P/S at face value as there may be an explanation as to why it is limited.

Check out our latest analysis for Converge Technology Solutions.

Converge Technology solution track record

Converge Technology Solutions' revenue has been growing faster than most other companies, and it's been in a good place recently. One possibility is that the P/S ratio is low because investors believe this strong earnings performance may become less impressive going forward. If you like the company, you'll hope it doesn't so you can potentially buy shares when the company is unpopular.

Want a complete picture of what analysts are forecasting for your company? Then check out our free Our report on Converge Technology Solutions will help you find out what's coming next.

Are revenue projections consistent with low profit and loss margins?

The only time we'd really feel comfortable seeing a P/S as low as Converge Technology Solutions' is if the company's growth is on a trajectory to lag its industry.

Looking back, the company achieved an unusual 25% increase in sales last year. Pleasingly, thanks to growth over the past 12 months, revenue has also increased by a total of 185% compared to his three years ago. So it's safe to say that the company's recent revenue growth has been impressive.

Looking to the future, the 11 analysts covering the company estimate that sales should grow at 4.0% per year over the next three years. The industry is expected to grow 11% annually, and the company's revenue is expected to be weak.

With this in mind, it's clear why Converge Technology Solutions' P/S is lagging behind its industry peers. Apparently, many shareholders were reluctant to continue holding on to the company, given the possibility that it would lose its future prosperity.

Important points

Despite Converge Technology Solutions' stock price rising recently, its earnings still lag behind most other companies. Price-to-sales ratios shouldn't be a deciding factor in whether or not to buy a stock, but it is a very useful barometer of earnings expectations.

As we expected, a check of analyst forecasts for Converge Technology Solutions reveals that a weaker earnings outlook is contributing to the lower P/S. Shareholders' pessimistic view of the company's earnings outlook seems to be the main reason for the low P/S. Unless this situation improves, a barrier to stock prices will continue to form around these levels.

A company's balance sheet is another important area of ​​risk analysis. Many of the major risks can be assessed through us. free Balance sheet analysis for Converge Technology Solutions with 6 easy checks.

If you are… I don’t understand the strength of Converge Technology Solutions’ business.Why not explore our interactive list of stocks with solid business fundamentals for other companies you may have missed?

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