Progress Software Corporation (NASDAQ:PRGS) Just Reported And Analysts Have Been Lifting Their Price Targets

Investors in Progress Software Corporation (NASDAQ:PRGS) had a good week, as its shares rose 4.1% to close at US$36.68 following the release of its quarterly results. It was a credible result overall, with revenues of US$111m and statutory earnings per share of US$0.53 both in line with analyst estimates, showing that Progress Software is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Progress Software

After the latest results, the three analysts covering Progress Software are now predicting revenues of US$515.1m in 2021. If met, this would reflect a solid 18% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 58% to US$2.02. Before this earnings report, the analysts had been forecasting revenues of US$514.0m and earnings per share (EPS) of US$2.18 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

Despite cutting their earnings forecasts,the analysts have lifted their price target 5.3% to US$46.67, suggesting that these impacts are not expected to weigh on the stock's value in the long term. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Progress Software at US$52.00 per share, while the most bearish prices it at US$43.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Progress Software's rate of growth is expected to accelerate meaningfully, with the forecast 18% revenue growth noticeably faster than its historical growth of 2.0%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Progress Software to grow faster than the wider industry.

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. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Progress Software. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Progress Software analysts - going out to 2022, and you can see them free on our platform here.

Before you take the next step you should know about the 3 warning signs for Progress Software that we have uncovered.

This article by Simply Wall St is general in nature. 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.