Progress Software (PRGS) AI Stock Analysis

• Market Cap: $1.78B
• Dividend Yield: N/A
• Average Volume (3M): 498.70K
• Price to Earnings (P/E): 37.2
• Beta (1Y): 0.26
• Revenue Growth: 31.41%
• EPS Growth: -40.89%
• Country: US
• Employees: 2,815
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.50
• Shares Outstanding: 42,907,574
• 10 Day Avg. Volume: 557,826
• 30 Day Avg. Volume: 498,696
• PEG Ratio: -17.52
• Price to Book (P/B): 6.75
• Price to Sales (P/S): 3.93
• P/FCF Ratio: 14.35
• Enterprise Value/Market Cap: 1.53
• Enterprise Value/Revenue: 2.90
• Enterprise Value/Gross Profit: 3.57
• Enterprise Value/Ebitda: 9.72
• 1Y Price Target: $49.50
• Price Target Upside: 20.97% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3
• EPS Forecast (FY): 5.68
• Revenue Forecast (FY): $992.48M

• Rating: 71 Outperform
• Price Target: $48.00 ▲(17.30% Upside)

Progress Software's overall stock score is driven by strong earnings call performance and solid financial growth, particularly in ARR and AI integration. However, mixed technical indicators and high valuation metrics slightly offset these strengths. The company must address profitability challenges and improve cash conversion to enhance its financial health further.

Positive Factors

Strong ARR Growth

The significant ARR growth indicates strong market demand and effective execution, supporting long-term revenue stability and business expansion.

AI-Driven Product Enhancements

AI integration enhances product offerings, driving customer engagement and competitive advantage, positioning the company well in the evolving tech landscape.

New Product Launch in AWS Marketplace

Listing in AWS Marketplace expands distribution channels, increasing accessibility and potential customer base, supporting long-term growth and market presence.

Negative Factors

Declining Net Profit Margin

The decline in net profit margin suggests rising costs or inefficiencies, which could impact profitability if not addressed, affecting long-term financial health.

Flat Net Retention Rate

Stable but non-growing retention rates indicate challenges in expanding existing customer relationships, potentially limiting future revenue growth.

Lower Operating Cash Flow Coverage

Lower cash flow conversion suggests potential liquidity issues, which could constrain operational flexibility and investment capacity over time.

Progress Software Business Overview & Revenue Model

Company Description

Progress Software Corporation develops, deploys, and manages business applications. The company offers OpenEdge, a development software, which builds multi-language applications for secure deployment across various platforms and devices, as well as cloud; developer tools that consists of components for user interface development for Web, mobile, desktop, chat, and AR/VR apps, as well as automated application testing and reporting tools; Sitefinity, a web content management and customer analytics platform; Corticon, a business rules management system that provides applications with decision automation and change process, and decision-related insight capabilities. It also offers DataDirect Connect, which provides data connectivity using industry-standard interfaces to connect applications running on various platforms; MOVEit that offers secure collaboration and automated file transfers of critical business information; Chef, an infrastructure automation platform to build, deploy, manage, and secure applications in multi-cloud and hybrid environments, and on-premises; and WhatsUp Gold, a network monitoring solution. In addition, the company provides Kemp LoadMaster, a load balancing solutions; and Kemp Flowmon network performance monitoring and diagnostic solutions that collect and analyze network telemetry from various sources. Further, it provides project management, implementation, custom development, programming, and other services, as well as web-enable applications; and training services. The company sells its products to end users, independent software vendors, original equipment manufacturers, and system integrators. It has operations in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. The company was founded in 1981 and is headquartered in Burlington, Massachusetts.

How the Company Makes Money

Progress Software generates revenue through multiple streams, primarily from software licensing, subscription services, and professional services. The company's key revenue streams include the sale of licenses for its development tools and platforms, ongoing subscriptions for cloud-based services, and support and maintenance contracts. Additionally, Progress earns income from consulting services that assist clients in implementing and optimizing their software solutions. Strategic partnerships with other technology firms enhance its offerings and broaden its market reach, contributing to its overall financial performance. The shift towards cloud computing and digital transformation also positions Progress to capitalize on the growing demand for modern application development and data management solutions.

Progress Software Financial Statement Overview

Summary

Progress Software demonstrates strong revenue growth and efficient cost management, as evidenced by its high gross profit margin. However, declining net profit and EBIT margins highlight potential profitability challenges. The balance sheet shows improved leverage, but the decrease in return on equity suggests reduced profitability. Cash flow metrics indicate effective cash management, although the lower operating cash flow coverage ratio warrants attention. Overall, the company is on a positive growth trajectory but must address profitability and cash conversion issues to sustain its financial health.

Income Statement

Progress Software shows a solid revenue growth rate of 8.18% in the TTM, indicating a positive growth trajectory. The gross profit margin remains strong at 81.11%, reflecting efficient cost management. However, the net profit margin has decreased to 5.16% in the TTM from 9.08% in the previous year, suggesting increased expenses or other financial pressures. The EBIT and EBITDA margins are healthy, but there is a noticeable decline in EBIT margin from 16.76% to 9.88%, which could be a concern if not addressed.

Balance Sheet

The company's debt-to-equity ratio has improved from 3.56 to 1.74, indicating a reduction in leverage and a more balanced capital structure. However, the return on equity has decreased from 15.60% to 10.78%, suggesting a decline in profitability relative to shareholder equity. The equity ratio remains stable, indicating a consistent proportion of equity financing.

Cash Flow

Operating cash flow to net income ratio is 0.25, which is lower than previous periods, indicating potential challenges in converting income into cash. However, free cash flow growth is positive at 9.26%, and the free cash flow to net income ratio remains strong at 0.97, suggesting effective cash management despite the lower operating cash flow coverage.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	940.13M	753.41M	694.44M	602.01M	531.31M	442.15M
Gross Profit	762.53M	622.93M	567.86M	507.52M	452.86M	380.04M
EBITDA	280.06M	124.00M	213.38M	214.77M	178.93M	149.50M
Net Income	48.53M	68.44M	70.20M	95.07M	78.42M	79.72M
Balance Sheet
Total Assets	2.42B	2.53B	1.60B	1.41B	1.36B	1.04B
Cash, Cash Equivalents and Short-Term Investments	99.01M	118.08M	126.96M	251.76M	157.37M	106.00M
Total Debt	830.83M	1.56B	757.22M	640.59M	599.28M	423.50M
Total Liabilities	1.94B	2.09B	1.14B	1.01B	951.05M	695.77M
Stockholders Equity	477.68M	438.79M	459.71M	393.99M	412.49M	346.01M
Cash Flow
Free Cash Flow	186.32M	206.29M	168.35M	186.07M	173.88M	138.33M
Operating Cash Flow	192.04M	211.49M	173.92M	192.16M	178.53M	144.85M
Investing Cash Flow	-879.07M	-857.91M	-360.38M	-6.09M	-258.62M	-218.69M
Financing Cash Flow	550.31M	640.82M	51.19M	-91.68M	131.46M	6.15M

Progress Software Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 40.92
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PRGS, the sentiment is Negative. The current price of 40.92 is below the 20-day moving average (MA) of 42.56, below the 50-day MA of 42.44, and below the 200-day MA of 49.64, indicating a bearish trend. The MACD of -0.34 indicates Positive momentum. The RSI at 41.12 is Neutral, neither overbought nor oversold. The STOCH value of 44.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PRGS.

Progress Software Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CXM	77 Outperform	$1.76B	16.45	21.35%	―	6.48%	168.94%
PRGS	71 Outperform	$1.78B	37.24	10.75%	―	31.41%	-40.89%
DBD	64 Neutral	$2.50B	51.45	4.66%	―	-2.86%	985.78%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
RNG	55 Neutral	$2.47B	190.39	―	―	5.45%	―
AMPL	52 Neutral	$1.37B	-12.86	-37.47%	―	12.78%	-20.47%