CTS Stock has an upside of 132%, Echelon says

“While near-term catalysts are tough to identify, we continue to see underlying fundamental value in the shares,” he said. “Q223 results continued the trend of bookings, revenue, and gross profit outperformance while EBITDA for the most recent two quarters has been largely in line with expectations,” the analyst said. “From an operating perspective, we see investors looking for evidence of improved efficiencies (expected to emerge exiting Q423) in EBITDA margin gains and clarity on free cash flow. The Company has previously noted that while it continues to look for free cash flow from working capital (WC), it sees volatility on a quarterly basis in part where large clients have extended payment. With acquisitions on hold and the focus on organic growth, we see gains where CTS delivers results in line with expectations. Looking into 2024, we look for evidence of stronger FCF and a reversal of the extended A/R days to improve sentiment.”

In a research update to clients October 20, Goff maintained his “Speculative Buy” rating and one-year price target of $5.40 on Converge Technology Solutions, implying a return of 132 per cent at the time of publication.

Goff thinks CTS will post Adjusted EBITDA of $171.3-million on revenue of $2.63-billion in fiscal 2023. He expects those numbers will improve to Adjusted EBITDA of $190.3-million on a topline of $2.76-billion the following year.