Have you been paying attention to shares of Progress Software (PRGS)? Shares have been on the move with the stock up 16.9% over the past month. The stock hit a new 52-week high of $67.9 in the previous session. Progress Software has gained 23.9% since the start of the year compared to the 26% move for the Zacks Computer and Technology sector and the 13% return for the Zacks Computer - Software industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on September 24, 2024, Progress Software reported EPS of $1.26 versus consensus estimate of $1.14 while it beat the consensus revenue estimate by 1.67%.
For the current fiscal year, Progress Software is expected to post earnings of $4.80 per share on $750.35 million in revenues. This represents a 10.34% change in EPS on a 7.48% change in revenues. For the next fiscal year, the company is expected to earn $5.74 per share on $932.07 million in revenues. This represents a year-over-year change of 19.5% and 24.22%, respectively.
Valuation Metrics
Progress Software may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Progress Software has a Value Score of C. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 14X current fiscal year EPS estimates, which is not in-line with the peer industry average of 30X. On a trailing cash flow basis, the stock currently trades at 10.9X versus its peer group's average of 25.2X. Additionally, the stock has a PEG ratio of 7. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Progress Software currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Progress Software passes the test. Thus, it seems as though Progress Software shares could have potential in the weeks and months to come.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
