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While Progress Software Corporation (NASDAQ:PRGS) might not have the largest market cap around , it saw a decent share price growth of 16% on the NASDAQGS over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Progress Software’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Progress Software
What Is Progress Software Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Progress Software’s ratio of 33.41x is trading slightly below its industry peers’ ratio of 38.97x, which means if you buy Progress Software today, you’d be paying a reasonable price for it. And if you believe that Progress Software should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Progress Software’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Progress Software?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 57% over the next couple of years, the future seems bright for Progress Software. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in PRGS’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at PRGS? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?