At US$68.73, Is It Time To Put Progress Software Corporation (NASDAQ:PRGS) On Your Watch List?

While Progress Software Corporation (NASDAQ:PRGS) might not have the largest market cap around , it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Progress Software’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Progress Software

What Is Progress Software Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 35.69x is currently trading slightly below its industry peers’ ratio of 41.47x, which means if you buy Progress Software today, you’d be paying a reasonable price for it. And if you believe that Progress Software should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Progress Software’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Progress Software look like?

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. Progress Software's earnings over the next few years are expected to increase by 57%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PRGS’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PRGS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on PRGS, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for PRGS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Progress Software you should be aware of.

If you are no longer interested in Progress Software, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.