Over the past six months, PROG has been a great trade, beating the S&P 500 by 7.5%. Its stock price has climbed to $35.50, representing a healthy 23.9% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy PROG, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think PROG Will Underperform?
We’re happy investors have made money, but we’re cautious about PROG. Here are three reasons why there are better opportunities than PRG, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Unfortunately, PROG struggled to consistently increase demand as its $2.61 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a low quality business.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for PROG, its EPS declined by 4.3% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
3. Declining TBVPS Reflects Erosion of Asset Value
Tangible book value per share (TBVPS) serves as a key indicator of a financial institution’s strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during economic distress.
Disappointingly for investors, PROG’s TBVPS continued freefalling over the past two years as TBVPS declined at a -53.1% annual clip (from $4.82 to $1.06 per share).
Final Judgment
PROG falls short of our quality standards. With its shares topping the market in recent months, the stock trades at 7× forward P/E (or $35.50 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d suggest looking at the most entrenched endpoint security platform on the market.
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