PROS Holdings Inc (NYSE:PRO), is a US$1.2b small-cap, which operates in the software industry based in United States. Technology has become a vital component of every industry, bringing unprecedented opportunities for growth, along with challenges and competition. Tech analysts are forecasting for the entire software tech industry, a positive double-digit growth of 23% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether PROS Holdings is a laggard or leader relative to its tech sector peers.
What’s the catalyst for PROS Holdings’s sector growth?
Since the regulatory environment is unlikely to become less complex, organizations will need to address the constantly evolving rules for governing data. In the previous year, the industry saw growth of 7.7%, though still underperforming the wider US stock market. PROS Holdings lags the pack with its lower growth rate of 0.05% over the past year, which indicates the company has been growing at a slower pace than its software peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with PROS Holdings poised to deliver a 12% growth compared to the industry average growth rate of 23%. As an industry laggard, PROS Holdings may be a cheaper stock relative to its peers.
Is PROS Holdings and the sector relatively cheap?
Software tech companies are typically trading at a PE of 48.75x, higher than the rest of the US stock market PE of 19.8x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 12% on equities compared to the market’s 10%. Since PROS Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PROS Holdings’s value is to assume the stock should be relatively in-line with its industry.
PROS Holdings is an tech industry laggard in terms of its future growth outlook. If PROS Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than its tech peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at PROS Holdings’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has PRO’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PROS Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.