2 Emerging TSX Tech Stocks: Revolutionizing Industries

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Written by Aditya Raghunath at The Motley Fool Canada

Investing in emerging tech stocks is a good strategy to build long-term wealth and generate outsized gains over time. But as technology is disruptive, it is quite risky to invest in this sector. A market leader today can easily be displaced tomorrow by a competitor or even a new player.

But their asset-light business and ability to scale at a low cost make tech stocks an enticing bet for those with a larger risk appetite. Here, we look at two such emerging tech stocks you can consider buying today.

Sylogist stock

A company that provides mission-critical SaaS (software-as-a-service) solutions to enterprises, Sylogist (TSX:SYZ) is valued at a market cap of almost $200 million. It serves over 2,000 public sector customers across verticals such as government, education, and non-profit.

Down 53% from all-time highs, Sylogist stock is now trading at an attractive valuation. It reported record sales of $15.9 million in the first quarter (Q1), an increase of 21% year over year. The company ended Q1 with a backlog of $28.1 million, up 17% year over year.

Sylogist closed $7.7 million in bookings in the quarter, as it managed to acquire new customers and increase spending from existing ones. As it provides mission-critical solutions to enterprises, Sylogist is well poised to benefit from higher customer retention rates.

Sylogist emphasized, “We are also pleased with the 6% quarter-over-quarter increase in revenue per employee we saw, indicating increased utilization and delivery efficacy amongst our project services team. The traction we have seen over the last six months gives us confidence that our profitable growth playbook is working and that we are executing as planned.”

Analysts tracking SYZ stock expect adjusted earnings to more than double from $0.17 per share in 2023 to $0.41 per share in 2024. So, SYZ stock is priced at 19 times forward earnings, which is quite cheap. It’s priced at a discount of 26% compared to the consensus price target.

Convergence Technology Solutions stock

The second TSX tech stock on my list is Converge Technology Solutions (TSX:CTS), an IT & Cloud services provider. Its offerings include advanced analytics, application modernization, digital infrastructure, and cybersecurity, providing the company with a diversified client base across industries.

Valued at a market cap of $700 million, CTS has increased sales from $688 million in 2019 to $2.16 billion in 2022. In Q1 of 2023, its gross revenue was up 43% year over year at $965.3 million, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) surged 39% to $41.2 million.

In the last year, CTS focused on several hardware-focused acquisitions, allowing it to expand sales at an enviable rate. But its gross profits also increased by 57% in Q1 of 2023.

CTS stock is very cheap and is priced at 0.25 times forward sales and just six times forward earnings. It further pays shareholders an annual dividend of $0.04 per share, indicating a forward yield of 1.24%.

CTS stock has more than tripled investor wealth in the last five years. But it’s now trading 76% below all-time highs, allowing you to buy the dip. The TSX stock is currently trading at a discount of 80% to price target estimates.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sylogist. The Motley Fool has a disclosure policy.