Valued at a market cap of $1.25 billion, Converge Technology Solutions (TSX:CTS) is a technology company that has surged over 50% in 2025, easily outpacing the broader markets.
The TSX stock gained pace last month after H.I.G. Capital disclosed plans to acquire Converge Technology Solutions in an all-cash transaction, valuing the company at approximately $1.3 billion.
Under the agreement, Converge shareholders will receive $5.50 per share in cash, representing a 56% premium to the closing price on February 6, 2025. After the acquisition, Converge will join H.I.G.-owned Mainline Information Systems, creating a larger IT solutions provider with expanded cybersecurity, cloud, and digital infrastructure capabilities. Converge chief executive officer (CEO) Greg Berard will lead the combined business as chief executive, with Mainline CEO Jeff Dobbelaere serving as president.
“This partnership not only ensures meaningful value for our shareholders but also lays the foundation to enhance how we serve our customers,” Berard said in a statement.
Today, CTS stock trades at $5.42 per share, which suggests that the upside potential is not significant if the acquisition is closed according to the current agreement terms.
Instead, Canadian investors can consider gaining exposure to Computer Modelling Group (TSX:CMG), a small-cap company that trades at a compelling valuation. Let’s see why.
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CMG is a TSX growth stock
Computer Modelling Group, valued at $665 million, is a Calgary-based software technology company specializing in reservoir simulation solutions for the energy industry. Founded in 1978, CMG develops and licenses software tools that help petroleum engineers optimize oil and gas recovery processes.
Its product suite includes CMOST-AI for intelligent optimization using machine learning, IMEX for black oil simulation, GEM for compositional reservoir modelling, STARS for thermal processes, and CoFlow for integrated production system modelling.
Computer Modelling Group’s total revenue grew 30% year over year to $29.5 million in the second quarter (Q2) of fiscal 2025 (which ended in September). Despite the revenue growth, net income in Q2 fell by 42% to $3.8 million due to a change in the fair value of contingent consideration and foreign exchange losses. Earnings per share fell to $0.05, down 38% from the same period last year.
CMG also closed its second major acquisition, Sharp Reflections GmbH, last November, strengthening its portfolio of technology solutions for the energy industry.
The acquisition of Bluware in the previous year contributed 29% to the overall revenue growth, though it currently operates at lower margins than CMG’s core business. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin fell to 34% from 47% in the same period last year.
Free cash flow decreased by 50% to $0.07 per share, primarily due to Bluware generating negative cash flows related to seasonality in revenue recognition.
Is the TSX stock undervalued?
Analysts tracking CMG expect it to increase sales from $108.7 million in fiscal 2024 to $146 million in fiscal 2026. Comparatively, adjusted earnings per share is forecast to expand from $0.34 in 2024 to $0.41 in 2026. So, priced at 19.6 times forward earnings, CMG trades at a reasonable multiple compared to its peers.
Today, the TSX tech stock trades 45% below all-time highs, allowing you to buy the dip and benefit from an attractive dividend yield of 2.4%. Given its outstanding share count, CMG’s annual dividend expense is around $16 million. Comparatively, it is forecast to report a free cash flow of $40 million in fiscal 2026, indicating a payout ratio of 40%.
Analysts remain bullish on CMG stock and expect it to gain over 50% over the next 12 months.
