Can Recent Price Surge in PROS Signal a Shift After New AI Product Launch?

Thinking about what to do with PROS Holdings stock right now? You are not alone. After a long stretch of underperformance, the stock has been making some noise, up nearly 48% in the last 30 days. Year to date, shares are modestly higher, in contrast to a rougher three- and five-year story. But with a one-year gain of almost 29%, there is a lot more optimism in the air than there was not so long ago. Investors are starting to notice, and some of that renewed interest connects to broader market sentiment that favors fast-growing, digital-first enterprise software providers like PROS Holdings.

This recent surge raises an obvious question: is the market finally seeing value where it had missed it, or is enthusiasm getting a little bit ahead of itself? To help answer that, let us take a closer look at the numbers. PROS Holdings currently earns a 4 out of 6 on our valuation score, signaling that it appears undervalued by several key measures. That does not happen by accident, and it gives us a strong starting point to assess just how much potential might be left or hidden risk still lurking.

In the following sections, we will break down PROS Holdings’ valuation score by each method so you can weigh the facts for yourself. Stick around until the end, though, because there is a smarter, deeper lens for viewing valuation that could make all the difference.

Why PROS Holdings is lagging behind its peers

Approach 1: PROS Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s dollars. This approach looks beyond current profits and focuses on how much cash the business can realistically generate over many years ahead.

For PROS Holdings, DCF analysis starts with its most recent free cash flow of $28.5 Million. Analysts provide estimates for the next few years, but projections for 10 years out are extrapolated to extend the outlook. According to these figures, free cash flow could grow from $56.8 Million in 2026 to as much as $139.7 Million by 2035, reflecting expectations for steady growth and improved financial performance.

Crunching the numbers, the DCF model calculates a fair value of $32.31 per share. Based on recent prices, this implies the stock is about 29% undervalued by this method. This is a significant margin that suggests the market may be underestimating PROS Holdings’ long-term earning power and growth potential.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests PROS Holdings is undervalued by 29.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: PROS Holdings Price vs Sales

The price-to-sales (PS) ratio is a widely used valuation metric for software companies like PROS Holdings, especially when profitability is limited or inconsistent. This metric helps investors understand how the market values the company’s revenues, making it a useful tool for evaluating growth-focused businesses where earnings are not the main story yet.

Growth expectations and business risks heavily influence what counts as a “normal” or “fair” PS ratio. Rapidly growing, high-margin companies often support above-average multiples, since investors are willing to pay more for their future potential. On the other hand, higher risks or slower growth may warrant a lower multiple.

Currently, PROS Holdings trades at a PS ratio of 3.23x. This sits above its peer average of 2.73x but remains below the broader software industry average of 5.29x. At first glance, that might suggest the market values PROS Holdings more optimistically than its peers, but still conservatively compared to most industry players.

Simply Wall St’s proprietary “Fair Ratio” refines this comparison further. Instead of just looking at what competitors fetch or the general industry trend, it factors in specifics for PROS Holdings such as growth forecasts, profit margins, market cap, and the unique risks of its business model. The Fair Ratio for PROS Holdings is calculated at 3.60x, which is more personalized than industry or peer comparisons.

Because the current PS ratio of 3.23x is moderately below the Fair Ratio, PROS Holdings appears to be undervalued by this measure. This signals upside for investors if the market eventually recognizes the company’s improved growth and risk profile.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your PROS Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple but powerful tool that allows you to connect a company’s story, your perspective about PROS Holdings' future growth and strategy, with your own financial forecast and an estimated fair value. Instead of just crunching numbers, Narratives let you interpret what is driving the business, how you think their revenue, margins, and profits might evolve, and what you believe the company is truly worth.

This approach is more dynamic than any single metric or analyst estimate because Narratives are updated live as news breaks or earnings are reported, letting you easily adjust your outlook. On Simply Wall St’s Community page, millions of investors already use Narratives to track their reasoning and compare it directly to the market price. This helps them decide whether a stock is a buy, sell, or hold based on their personalized fair value.

For PROS Holdings, this means one investor might see the company’s cloud and AI expansion unlocking significant growth, leading them to set a higher fair value around $36.00, while another might worry about competition and margin risks, anchoring their Narrative at $18.00. With Narratives, you can clearly see the factors behind these viewpoints and choose an investment thesis that fits your own convictions, giving you a smarter, more adaptable way to make investment decisions.

Do you think there's more to the story for PROS Holdings? Create your own Narrative to let the Community know!

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.

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