Progress Software Corporation (NASDAQ:PRGS), which is in the software business, and is based in United States, received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$43.65 at one point, and dropping to the lows of US$37.09. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Progress Software's current trading price of US$40.57 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Progress Software’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Progress Software?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11% below my intrinsic value, which means if you buy Progress Software today, you’d be paying a fair price for it. And if you believe that the stock is really worth $45.67, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Progress Software has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Progress Software?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Progress Software. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, PRGS appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on PRGS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on PRGS should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Progress Software. You can find everything you need to know about Progress Software in the latest infographic research report. If you are no longer interested in Progress Software, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.