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While shareholders of Converge Technology Solutions (TSE:CTS) are in the black over 1 year, those who bought a week ago aren't so fortunate

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  • CTSDF

Active investing isn't easy, but for those that do it, the aim is to find the best companies to buy, and to profit handsomely. When you buy and hold the right company, the returns can make a huge difference to both you and your family. In the case of Converge Technology Solutions Corp. (TSE:CTS), the share price is up an incredible 301% in the last year alone. And in the last month, the share price has gained 23%. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

Since the long term performance has been good but there's been a recent pullback of 3.1%, let's check if the fundamentals match the share price.

See our latest analysis for Converge Technology Solutions

We don't think that Converge Technology Solutions' modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last year Converge Technology Solutions saw its revenue grow by 37%. We respect that sort of growth, no doubt. But the market is even more excited about it, with the price apparently bound for the moon, up 301% in one of earth's orbits. We're always cautious when the share price is up so much, but there's certainly enough revenue growth to justify taking a closer look at Converge Technology Solutions.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Converge Technology Solutions in this interactive graph of future profit estimates.

A Different Perspective

Converge Technology Solutions boasts a total shareholder return of 301% for the last year. That's better than the more recent three month gain of 0.7%, implying that share price has plateaued recently. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). It's always interesting to track share price performance over the longer term. But to understand Converge Technology Solutions better, we need to consider many other factors. Even so, be aware that Converge Technology Solutions is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

Converge Technology Solutions is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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