Progress Software Corp /Ma (NASDAQ: PRGS)

Sector: Technology Industry: Software - Infrastructure CIK: 0000876167
Market Cap 1.81 Bn
P/B 3.78
P/E 37.24
P/S 1.92
ROIC (Qtr) 5.22
Div Yield % 0.00
Rev 1y % (Qtr) 39.80
Total Debt (Qtr) 1.45 Bn
Debt/Equity (Qtr) 3.04

About

Progress Software Corporation (PRGS) is a prominent player in the enterprise software industry, offering a variety of products and services designed to aid in the development, deployment, and management of high-impact business applications. The company has a global presence, with operations spanning North America, Latin America, Europe, the Middle East and Africa (EMEA), and Asia Pacific. Progress' main business activities revolve around providing software solutions for application development, data management, and network infrastructure monitoring....

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Price action

Investment thesis

Bull case

  • Robust free cash flow of 186.32M exceeds capital expenditure of 5.72M by 32.59x, indicating strong organic growth funding capability.
  • R&D investment of 183.58M represents healthy 0.48x of deferred revenue 381.06M, indicating strong future innovation pipeline.
  • Operating cash flow of 192.04M provides strong 73.89x coverage of tax liabilities 2.60M, showing excellent fiscal position.
  • Robust R&D investment of 183.58M at 0.60x of SG&A 308.51M demonstrates strong commitment to innovation and future growth.
  • Cash reserves of 99.01M provide comfortable 38.09x coverage of tax obligations 2.60M, showing strong fiscal management.

Bear case

  • Operating cash flow of 192.04M barely covers its investment activities of (879.07M), with a coverage ratio of -0.22, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (879.07M) provide weak support for R&D spending of 183.58M, which is -4.79x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 192.04M provides thin coverage of dividend payments of (8.30M) with a -23.14 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 99.01M provide limited coverage of acquisition spending of (873.36M), which is -0.11x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 192.04M provides insufficient coverage of deferred revenue obligations of 381.06M, which is 0.50x, raising concerns about future service delivery capabilities.

Geographical Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Infrastructure
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MSFT Microsoft Corp 3,554.89 Bn 33.88 12.10 60.56 Bn
2 ORCL Oracle Corp 536.76 Bn 34.80 8.80 124.39 Bn
3 PLTR Palantir Technologies Inc. 412.18 Bn 376.30 105.79 0.24 Bn
4 PANW Palo Alto Networks Inc 127.64 Bn 114.25 13.36 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 114.75 Bn -365.25 25.14 0.82 Bn
6 SNPS Synopsys Inc 84.31 Bn 63.28 11.95 14.29 Bn
7 NET Cloudflare, Inc. 64.21 Bn -623.20 31.89 3.50 Bn
8 FTNT Fortinet, Inc. 59.93 Bn 31.99 9.14 1.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.32 2.69
EV to Cash from Ops. EV/CFO 16.70 28.91
EV to Debt EV to Debt 2.21 19.83
EV to EBIT EV/EBIT 23.44 -9.95
EV to EBITDA EV/EBITDA 20.77 6.82
EV to Free Cash Flow [EV/FCF] EV/FCF 17.21 26.09
EV to Market Cap EV to Market Cap 1.76 0.36
EV to Revenue EV/Rev 3.41 -9.34
Price to Book Value [P/B] P/B 3.81 3.88
Price to Earnings [P/E] P/E 37.49 -10.66
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 5.85 -0.30
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.71
Dividend per Basic Share Div per Share (Qtr) 0.00 0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 1.68
Interest Coverage Int. cover (Qtr) 2.10 -14.20
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -21.22 -408.01
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -57.45 226.39
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -13.78 25.27
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 8.07 47.48
EBIT Growth (1y) % EBIT 1y % (Qtr) 9.29 20.13
EBT Growth (1y) % EBT 1y % (Qtr) -25.54 14.16
EPS Growth (1y) % EPS 1y % (Qtr) -40.53 67.50
FCF Growth (1y) % FCF 1y % (Qtr) -15.42 296.60
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 29.72 46.75
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.39 0.67
Cash Payout Ratio Cash Payout (Qtr) 0.04 0.01
Cash Ratio Cash Ratio (Qtr) 0.13 1.22
Current Ratio Curr Ratio (Qtr) 0.44 2.59
Debt to Equity Ratio Debt/Equity (Qtr) 3.04 -0.96
Interest Cover Ratio Int Coverage (Qtr) 2.10 -14.20
Times Interest Earned Times Interest Earned (Qtr) 2.10 -14.20
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 16.50 -548.16
EBIT Margin % EBIT Margin % (Qtr) 14.55 -199.84
EBT Margin % EBT Margin % (Qtr) 7.62 -607.20
Gross Margin % Gross Margin % (Qtr) 81.10 51.88
Net Profit Margin % Net Margin % (Qtr) 5.20 -610.00