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Convergys: Revenue, EPS, Valuations

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Convergys and its valuations

Convergys (CVG) has missed three consensus revenue estimates and four consensus EPS estimates in the last 20 quarters. Its revenue and EPS have grown at a five-year CAGR (compound annual growth rate) of 6.8% and 45.2%, respectively. It has a price-to-sales ratio of 0.8x compared to the sector at 2.7x and the S&P 500 at 2.2x.

The company’s PE ratio of 16.1x compares to the sector and the S&P 500 at 33.5x and 22.1x, respectively. It has a dividend yield of 1.8% compared to the sector and the S&P 500 at 1.8% and 2.3%, respectively.

CVG stock has risen 6.4% year-to-date.

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What contributed to CVG’s valuations?

This year, Convergys has recorded its financial results for fiscal 2017 and the first quarter of 2018, launched products, and revised its hiring plans.

  • Convergys in Welland announced increased wages in January.
  • In January, it announced the departure of Andrea Ayers as CEO and its ongoing search for a new CEO.
  • Convergys’s revenue decreased 4% in fiscal 2017 due to volume instabilities with its largest communications and technology clients. That was partially offset by revenue growth from clients in the financial services and other verticals. Its EPS grew 2% during the period.
  • The company announced 400 new jobs in Lynchburg, Virginia, in February.

Significant developments in March include the following:

  • Convergys announced the launch of Convergys CX, a cloud-based voice-of-the-customer platform.
  • Convergys’s Virtual Assistant (or VA) Solutions enabled a principal insurance provider to cut down on the number of repeat callers and improve CSAT (customer satisfaction).
  • The company announced its expansion in the EMEA (Europe, the Middle East, and Africa) by opening a new site in Timișoara, Romania.

Significant developments in April and May include the following:

  • The company was selected to serve as a founding member of the Emerging Europe Alliance for Business Services, Innovation, and Technology.
  • Convergys Wichita announced a job fair.
  • The company fast-tracked the deployment of Robotic Process Automation into more than a third of its workforce.
  • Convergys in Rio Rancho, Arnold, and Laredo announced their hiring plans.
  • Convergys introduced conversational virtual assistant technology to a principal North American financial institution. It reduced annual costs by $8.5 million.
  • Its revenue decreased 7% in the first quarter of 2018 due to lower revenue from communications, technology, financial services, and others, offset by retail. Its EPS decreased 21% during the quarter. The company raised its dividend 10%.
  • Convergys Olathe announced its hiring plans in May.

AI ETFs

The Sprott Buzz Social Media Insights ETF (BUZ) offers a dividend yield of 0.4% at a PE ratio of 18.6x. It has 45% exposure to the technology sector. The Global X Autonomous & Electric Vehicles ETF (DRIV) has a 45% exposure to the technology sector.

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