Is It Time To Reconsider Progress Software (PRGS) After Its 1 Year Share Price Slump?

• If you are wondering whether Progress Software is attractively priced or not, this article will walk through what the numbers are really saying about its current valuation.
• The stock closed at US$40.92, with returns of 3.6% decline over 7 days, 4.7% decline over 30 days, 0.4% decline year to date, 28.6% decline over 1 year, 26.2% decline over 3 years, and 1.7% gain over 5 years. This gives you a sense of how sentiment around risk and opportunity has shifted over different timeframes.
• Recent coverage of Progress Software has focused on its role as a provider of application development and infrastructure software, as investors reassess where it fits within the broader software sector. This context matters because moves in the share price are often tied to how investors feel about the resilience and relevance of its product portfolio.
• On Simply Wall St's valuation checklist, Progress Software scores a 5 out of 6 for being assessed as undervalued. Next, we will walk through the main valuation methods behind that score and then finish with a way to look at value that goes beyond any single model.

Find out why Progress Software's -28.6% return over the last year is lagging behind its peers.

Approach 1: Progress Software Discounted Cash Flow (DCF) Analysis

A DCF model takes estimates of a company’s future cash flows and discounts them back to today using a required return, aiming to translate those future dollars into a single present value per share.

For Progress Software, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $228.5 million. Analysts provide several years of explicit forecasts, and Simply Wall St then extends those projections, with free cash flow for 2030 estimated at $334.35 million and further ten year projections stepping up modestly from there.

Putting all of those projected cash flows together, the DCF model arrives at an estimated intrinsic value of about US$89.94 per share. Compared with the recent share price of US$40.92, this implies the stock is trading at about a 54.5% discount to that DCF estimate. This indicates a material valuation gap based on these cash flow assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Progress Software is undervalued by 54.5%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Progress Software.

Approach 2: Progress Software Price vs Earnings

For a profitable company like Progress Software, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. Investors usually accept higher P/E ratios when they expect stronger earnings growth or see lower risk, and look for lower P/E ratios when growth expectations are more modest or risks feel higher.

Progress Software currently trades on a P/E of 23.56x. That sits below both the Software industry average P/E of 28.00x and the peer average of 27.27x, which suggests the market is applying a lower earnings multiple than it does to many comparable names.

Simply Wall St’s Fair Ratio for Progress Software is 24.46x. This is a proprietary estimate of what the P/E might be given factors such as the company’s earnings growth profile, its industry, profit margins, market cap and specific risks. Because it adjusts for these company level traits, the Fair Ratio can be more tailored than a simple comparison with peers or the broad industry, which treat all companies as if they deserve similar multiples.

With the current P/E of 23.56x versus a Fair Ratio of 24.46x, Progress Software appears modestly undervalued on this earnings based check.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1417 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Progress Software Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Progress Software’s business with the numbers behind it.

A Narrative is your story for the company, where you spell out what you think its future revenue, earnings and margins might look like, and then link that forecast to a fair value estimate.

On Simply Wall St, Narratives sit inside the Community page and are designed to be easy to use. This means you can move from story, to forecast, to fair value without needing to build your own spreadsheet.

Narratives help you compare each Narrative’s Fair Value to the current share price. They automatically refresh when new information such as news or earnings is added to the platform.

For example, one Progress Software Narrative might assume a much higher fair value than the current price. Another might assume a lower fair value than the current price. This shows how different investors can look at the same company and reach very different conclusions.

Do you think there's more to the story for Progress Software? Head over to our Community to see what others are saying!

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.

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