Here’s one top TSX tech stock that has grown investors’ money seven-fold in one year. The chart below shows the one year’s transformation of a $10,000 investment in Converge Technology Solutions (TSX:CTS) stock, outperforming Shopify and Lightspeed POS.
Data by YCharts.
Here’s how Converge achieved this amazing feat. Having a few growth stocks like Converge can push ahead your retirement date much sooner!
From small cap to mid cap
Investopedia defines a mid-cap stock as one that has a market cap of $2 to $10 billion. Converge stock just passed the threshold of $2 billion. It’s easier for a small cap to double its market cap from, say, $500 million to $1 billion versus a large cap doubling from, say, a $15 billion market cap to $30 billion.
Even if you just discovered the top tech stock at the start of this year, you’d still have doubled your investment, which are much stronger returns than the 23%, 7%, or 27% in traditional stocks such as Royal Bank of Canada, Fortis, and Enbridge in the same period.
Not every small-cap stock grows larger, though. Many have trouble consistently growing. Let’s explore the top tech stock’s well-defined growth strategy on which it has executed well thus far.
The top TSX tech stock’s growth strategy
Converge is a software-enabled IT and cloud solutions provider that delivers advanced analytics, cloud, cybersecurity, and managed services offerings to clients across various industries. It focuses on mid-market customers, which have lagged large companies in terms of IT transformation.
Management saw the attractive opportunity to grow by M&A. Converge has completed 20 acquisitions to date, averaging four acquisitions per year since 2017. The top tech stock expects to complete the integration of seven subsidiaries by the end of the year.
Historically, its acquisitions have been accretive very quickly via cost savings and cross selling of Converge’s offerings. It also has a pattern of increasing its adjusted EBITDA at a higher rate than its revenue. For example, its 2020 revenue growth was 38% versus its adjusted EBITDA growth of 91%.
The top tech stock has been expanding in North America successfully, and it’s just beginning to expand in Europe. It’s in the process of acquiring Vicom Infinity and Infinity Systems Software, which will allow Converge to increase its revenues to north of $2 billion. However, they’re its largest acquisitions yet, which could be more complicated to integrate than usual.
If the tech stock experiences any hiccups, it could be an excellent opportunity to buy the dip. Converge has lots of growth prospects. By the end of 2025, management sees the potential to grow revenues to $5 billion and expand its EBITDA margin to 10%.
The Foolish investor takeaway
Invest in a basket of top tech stocks to experience the extraordinary growth potential that the sector provides, which should allow you to advance your retirement date by a matter of years! Converge could be in that basket.
Interested investors might consider starting a position now. Then add more after it succeeds in its latest, larger acquisitions and its European expansion plan.
However, if it continues to win, as it has in the last few years, you can be sure that the top tech stock will trade at much higher levels from today’s $10.83 per share.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
The Motley Fool owns shares of and recommends Enbridge, Lightspeed POS Inc, and Shopify. The Motley Fool recommends FORTIS INC and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. Fool contributor Kay Ng owns shares of Converge, Fortis, Royal Bank of Canada, and Shopify.