It's shaping up to be a tough period for Progress Software Corporation (NASDAQ:PRGS), which a week ago released some disappointing annual results that could have a notable impact on how the market views the stock. Results showed a clear earnings miss, with US$413m revenue coming in 3.2% lower than what analysts expected. Statutory earnings per share (EPS) of US$0.58 missed the mark badly, arriving some 36% below what analysts had expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Progress Software's three analysts is for revenues of US$452.0m in 2020, which would reflect a notable 9.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to surge 115% to US$1.27. In the lead-up to this report, analysts had been modelling revenues of US$435.2m and earnings per share (EPS) of US$1.10 in 2020. So it seems there's been a definite increase in optimism about Progress Software's future following the latest results, with a decent improvement in the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that analysts have lifted their price target 12% to US$57.25 per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Progress Software at US$60.00 per share, while the most bearish prices it at US$49.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Analysts are definitely expecting Progress Software's growth to accelerate, with the forecast 9.4% growth ranking favourably alongside historical growth of 3.0% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. So it's clear that despite the acceleration in growth, Progress Software is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Progress Software following these results. Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Progress Software going out to 2021, and you can see them free on our platform here..
You can also see whether Progress Software is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.