Progress Software Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Investors in Progress Software Corporation (NASDAQ:PRGS) had a good week, as its shares rose 7.1% to close at US$57.83 following the release of its full-year results. Progress Software reported US$694m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.57 beat expectations, being 5.4% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Progress Software after the latest results.

View our latest analysis for Progress Software

Taking into account the latest results, the consensus forecast from Progress Software's six analysts is for revenues of US$728.8m in 2024. This reflects a credible 4.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to soar 23% to US$1.98. In the lead-up to this report, the analysts had been modelling revenues of US$727.2m and earnings per share (EPS) of US$2.19 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$63.33, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Progress Software analyst has a price target of US$66.00 per share, while the most pessimistic values it at US$60.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Progress Software's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.9% growth on an annualised basis. This is compared to a historical growth rate of 13% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Progress Software.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Progress Software going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Progress Software , and understanding these should be part of your investment process.

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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.