Top and Bottom Surprise for Progress (NASDAQ:PRGS) – TipRanks.com

Progress Corp Software (NASDAQ:PRGS) announced its financial results for the latest quarter and surprised the market with its revenue and earnings results. The company’s strong revenue performance and sound expense control contributed to these results. The stock rose more than 10% immediately following the news and looks set to continue that momentum into the future with AI integration into its products and potential promising acquisitions on the horizon.

The company’s shares are trading at a lower price than its industry peers, making them an attractive option for investors looking for a value technology investment.

Advances that include artificial intelligence

Progress is a multinational software corporation that creates, implements and manages business applications that increase the productivity of technical teams. Its products are sold to end users, independent software vendors, original equipment manufacturers, system integrators, value-added resellers and distributors.

PRGS is investing heavily in artificial intelligence (AI), adding capabilities to its products and enabling customers to build and manage AI-powered applications more efficiently.

Progress’ growth strategy relies heavily on mergers and acquisitions (M&A), with a steady stream of potential candidates under consideration. Possible acquisition of MariaDB (NYSE:MRDB)open-source relational database company, is undergoing a thorough due diligence review. Management is very focused on mergers and acquisitions as a primary tool to double the size of the company over the next five years.

Progress’s latest financial results and forecasts

The company just announced its second-quarter 2024 financial results. Reported revenue of $175.08 million topped analyst expectations of $168.42 million, although it represented a 2% year-over-year decline. Annual recurring revenue (ARR) came in at $579 million, representing a 1% year-over-year increase. Additionally, the company demonstrated strong operating efficiency with an operating margin of 16% and non-GAAP operating margin of 38%, resulting in earnings per share (EPS) of $1.09, which beat analyst forecasts of $0.95.

Progress also declared a quarterly dividend of $0.175 per share, with an effective dividend yield of 1.33%, to be paid to shareholders on September 16, 2024.

Management provided guidance for the next quarter and full year. For the third quarter of 2024, the company expects revenue of $174 million to $178 million. Diluted earnings per share are projected to be $1.11 million to $1.15 million. Fiscal 2024 revenue is projected to be in the range of $725 million to $735 million, up from the prior guidance of $722 million to $732 million. Diluted earnings per share are expected to be in the range of $4.70 million to $4.80 million, up from the prior guidance of $4.65 million to $4.75 million.

What is the target price for PRGS stock?

Analysts following the company were cautiously optimistic about the stock. For example, Jefferies analyst Brent Thill recently lowered his price target on the stock from $60 to $55 while maintaining a Hold rating. He noted that the top and bottom lines are beating Q2 and the current valuation is reasonable, although the catalyst for future growth is still uncertain.

Overall, Progress Software is rated as a Moderate Buy based on recommendations and price targets recently issued by three analysts. The average price target for PRGS stock is $61.50, representing a potential upside of 13.34% from current levels.

The rebound in the share price after the announcement of the results resulted in a change in price dynamics and the shares are now above the 20-day (50.87) and 50-day (50.86) moving averages. The stock is trading in the middle of its 52-week price range of $48.16-$61.54 and appears undervalued relative to its industry peers, with a P/S ratio of 3.4x compared to the Software Infrastructure industry average of 9.87x.

PRGS Summary

Progress reported strong financial results, beating estimates for revenue and earnings per share in the second quarter of 2024. The incorporation of artificial intelligence capabilities into its products and a commitment to growth through M&A indicate further growth potential. With shares trading at a discount to industry peers and an optimistic outlook for the future, PRGS stands out as an attractive value investment opportunity.

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