One-glance verdict
Undervalued
$101.40 our estimate vs market $40.34
Wall Street consensus: $55.80 (-45.0% lower than our fair-value estimate)
60% below our estimate, below the bear case
Fundamentals snapshot
Progress Software Corporation
PRGS · NMS · Technology · Software - Infrastructure
Current price
$40.34
52-week range
$23.82 - $47.37
Market cap
$1.65B
Balance sheet
Distressed
2.46x Stretched
Net debt $1.22B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
3 Risks
3 rewards · 3 risks
- Reward Revenue grew 2.6% last year.
- Reward Returns 18.6% on equity, ahead of 33% of its peers.
- Risk Net debt grew 247.4% over 3 years.
- Risk Operating margin compressed from 21.2% to 18.5% over 3 years.
What this company does
Progress Software Corporation
Progress Software sells the essential "behind-the-scenes" tools that other companies use to build their own software applications and manage their computer networks securely. The company makes most of its money from subscriptions to these products, creating predictable recurring revenue (income that comes in consistently, like a magazine subscription). This is important because once a business builds its operations using Progress's tools, it can be difficult and costly for them to switch to a competitor.
How the company got here
Progress Software was started in 1981 by a few graduates from MIT. Their initial goal was to make it easier for businesses to build their own software applications. For a long time, they were known for a product called OpenEdge, which became a reliable tool for many companies. Over the years, instead of just building new products from scratch, the company began to grow by purchasing other software companies, a strategy they call their 'Total Growth Strategy'. This approach has allowed them to expand into many different areas of business software, adding new tools and capabilities with each acquisition.
What it actually does
Think of Progress Software as a company that provides the digital tools and building blocks for other businesses to create and manage their own software and online experiences. You wouldn't buy their products in a store, but many of the apps and websites you use every day might be built with their technology. They offer a wide range of products that help developers write code, manage websites, secure their networks, and make sense of large amounts of data. Essentially, they help other companies' technology run smoothly and securely behind the scenes.
Application and Infrastructure Development
This is the company's original and core business, providing the foundational tools for software developers. Their flagship product, OpenEdge, is a platform that helps businesses build and run critical applications. They also sell a popular collection of developer tools called Telerik and Kendo UI, which are like pre-made components that software builders can use to create modern and user-friendly web, mobile, and desktop applications more quickly. This part of the business makes money by selling licenses and subscriptions to these development tools to companies of all sizes.
Digital Experience
This area focuses on helping businesses create and manage their online presence. The main product here is Sitefinity, a system that allows companies to build and run websites, and then analyze how visitors interact with them. Recently, Progress acquired ShareFile, a service that lets businesses securely share and manage documents with their clients, which is especially useful for industries like finance and healthcare. Revenue (the total money a company brings in from sales) from this segment comes from companies paying for subscriptions to use these web and document management tools.
Infrastructure Management and Security
This part of the company provides tools to help businesses monitor and protect their computer networks and systems. Products like WhatsUp Gold keep an eye on a company's IT infrastructure (all their computers, servers, and network devices) to spot and fix problems before they cause an outage. Another key product, MOVEit, allows for the secure transfer of sensitive files, which is very important for businesses that handle private customer data. Progress makes money here by selling these security and monitoring products to IT departments in various organizations.
Data and AI
This is a newer but increasingly important part of Progress's business, focused on helping companies manage and use their data, especially for artificial intelligence (AI). Products like MarkLogic and Semaphore help organizations connect and make sense of complex data from many different sources. They also offer tools that allow other software developers to add AI-powered features into their own applications. This segment generates income by selling platforms and tools that help businesses prepare their data for AI and build smarter applications.
What management is betting on now
The company's main focus is on continuing its 'Total Growth Strategy,' which means it plans to keep acquiring other software companies that have loyal customers and products that fit well with its existing portfolio. A major priority is integrating its recent acquisitions, like ShareFile, to offer more services to its existing customer base. Management is also heavily investing in artificial intelligence (AI), aiming to embed AI features across their product lines to help their customers build smarter applications and make better use of their data.
Price history
How the share price has moved
—
Loading price history…
Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$56.59M
FY2024 Q4
$16.77M
FY2025 Q1
$67.66M
FY2025 Q2
$29.50M
FY2025 Q3
$72.39M
FY2025 Q4
$59.94M
FY2026 Q1
$95.92M
FY2026 Q2
$76.97M
Revenue
$253.47M
Net income
$21.07M
Diluted EPS
0.50
Operating cash flow
$78.84M
Free cash flow
$76.97M
Fetching…
Sources
Revenue
$247.80M
Net income
$22.81M
Diluted EPS
0.53
Operating cash flow
$98.63M
Free cash flow
$95.92M
Fetching…
Sources
Revenue
$252.67M
Net income
$25.75M
Diluted EPS
0.59
Operating cash flow
$62.80M
Free cash flow
$59.94M
Fetching…
Sources
Revenue
$249.79M
Net income
$19.41M
Diluted EPS
0.44
Operating cash flow
$73.45M
Free cash flow
$72.39M
Fetching…
Sources
Revenue
$237.35M
Net income
$17.03M
Diluted EPS
0.39
Operating cash flow
$30.00M
Free cash flow
$29.50M
Fetching…
Sources
Revenue
$238.01M
Net income
$10.95M
Diluted EPS
0.24
Operating cash flow
$68.95M
Free cash flow
$67.66M
Fetching…
Sources
Revenue
$214.96M
Net income
$1.15M
Diluted EPS
0.01
Operating cash flow
$19.65M
Free cash flow
$16.77M
Fetching…
Sources
Revenue
$178.69M
Net income
$28.46M
Diluted EPS
0.65
Operating cash flow
$57.66M
Free cash flow
$56.59M
Fetching…
Sources
Is it cheap or expensive?
Fair value $101.40 vs current price $40.34
Wall Street consensus is the average analyst price target: $55.80 (-45.0% lower than our fair-value estimate).
Our most-likely fair value is $101.40 a share — about 151.4% above today's price of $40.34, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Distressed
Net debt $1.2B. Interest coverage 2.5x.
Net debt
$1.22B
Interest coverage
2.46x
Progress Software Corporation's profit covers its interest bill about 2.5 times over. and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Distressed
Worse cushion
Baseline
Better cushion
PRGS
BASELINE
Progress Software Corporation
Total debt $1.33B Interest coverage 2.46x This is the baseline the peer rows are being compared against.
Total debt $528.37M Interest coverage -22.31x -100% vs PRGS This peer has almost no interest-payment cushion compared with PRGS.
Total debt $917.65M Interest coverage 27.83x +1,030% vs PRGS Carries about 11.3x more debt cushion than PRGS.
Total debt $39.98M Interest coverage 64.93x +2,536% vs PRGS Carries about 26.4x more debt cushion than PRGS.
What you should know
The case for and against PRGS
3 Rewards
3 Risks
Rewards
-
Revenue grew 2.6% last year.
-
Returns 18.6% on equity, ahead of 33% of its peers.
-
Free cash flow was positive in 10/10 years.
Risks
-
Net debt grew 247.4% over 3 years.
-
Operating margin compressed from 21.2% to 18.5% over 3 years.
-
Insider ownership is only 2.3% (peer median: 3.0%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
19.58x
Forward P/E
6.48x
P/B
3.29x
P/S
1.65x
EV/EBITDA
8.60x
PEG ratio
1.28x
Profitability
How much profit each dollar creates
Gross margin
85.6%
Operating margin
18.5%
Net margin
8.9%
ROE
18.6%
ROA
4.9%
Health
Liquidity and balance-sheet strength
Debt / equity
2.62x
Current ratio
0.81x
Quick ratio
0.67x
Total debt
$1.33B
Total cash
$102.98M
Growth
How the business has been compounding
Revenue TTM
$1.00B
Revenue 5Y CAGR
16.5%
EPS TTM
2.06
EPS 5Y CAGR
-8.3%
Cash flow
How much cash the business throws off
Operating CF TTM
$313.71M
Free CF TTM
$229.49M
FCF margin
22.9%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
2024-08-30