This Software Stock Could Be a Short and Long Term Winner

Progress Software is battling its year-to-date breakeven level

Sep 17, 2021 at 10:00 AM
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Most investors know software stocks Oracle (ORCL) or Trade Desk (TTD). But there's a lesser-known software stock that should be on Wall Street's radar, especially next week. Progress Software Corporation (NASDAQ:PRGS) offers products designed to make technology teams more productive and allows organizations to accelerate the creation and delivery of strategic business applications. Next Thursday, the software company will step up to the earnings plate on Thursday, Sept. 23 after the market closes. Ahead of the event, options traders are bracing for a bigger-than-usual move.

Progress Software stock has a history of positive post-earnings moves, with five of the last eight reports resulting in gains after the event, including a 5.9% bull gap back in March. Overall, PRGS averages a post-earnings move of 4.7% in the last two years, regardless of direction. This time around though, the options market is pricing in a 6.8% move.

Progress Software stock may be up 30% year-over-year, but its facing off with its year-to-date breakeven level. A short squeeze could help PRGS reach its Jan. 14 annual high of $49.23. A healthy 6.6% of the stock's total available float is sold short, and at its average pace of trading, it would take shorts almost 11 days to buy back their bearish bets. 

From a fundamental point of view, Progress Software stock doesn’t appear to have a great valuation at the moment, with a forward dividend of $0.70 and a dividend yield of 1.57%.. PRGS currently trades at a high price-earnings ratio of 27.97. However, the software company is expected to have a significant boost in earnings over the coming year, with analysts giving PRGS an intriguing forward price-earnings ratio of 13.04. In addition, Progress Software’s revenues have remained consistent over the past few years, growing 20% since fiscal 2018.

On the bottom-line Progress Software has been less consistent. PRGS experienced a 58% decrease in net income for fiscal 2019. Nonetheless, in the long-term Progress Software has managed to just about double net income over the span of four years. In general, Progress Software stock has decent potential as a long-term growth play, but could also be an option for value investors in the short term.

 

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