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Investing in Progress Software (NASDAQ:PRGS) three years ago would have delivered you a 37% gain

Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make better returns by buying undervalued shares. To wit, Progress Software Corporation (NASDAQ:PRGS) shares are up 31% in three years, besting the market return. Zooming in, the stock is up a respectable 10% in the last year.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Progress Software

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Progress Software achieved compound earnings per share growth of 31% per year. The average annual share price increase of 9% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

It is of course excellent to see how Progress Software has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Progress Software's TSR for the last 3 years was 37%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Progress Software shareholders have received a total shareholder return of 12% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Progress Software better, we need to consider many other factors. Even so, be aware that Progress Software is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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