Progress Software Corporation (PRGS) DCF Valuation & Fundamental Primer
Progress Software Corporation (PRGS) currently trades at $40.69 with an enterprise value of $5.70B. Our proprietary institutional model rates Progress Software Corporation at 83/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of -2.6% vs. historical growth of 17.2% (Substantial Margin of Safety).
Institutional fundamental teardown of Progress Software Corporation (PRGS) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Progress Software Corporation (PRGS) 3-Scenario DCF Valuation Range
Stress-test PRGS's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $40.69).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $129.88 +219% | $139.22 +242% | $150.12 +269% | $163.01 +301% | $178.46 +339% |
| 9.3% | $114.68 +182% | $122.04 +200% | $130.49 +221% | $140.30 +245% | $151.81 +273% |
| 10.0% | $102.19 +151% | $108.11 +166% | $114.82 +182% | $122.48 +201% | $131.32 +223% |
| 10.8% | $91.75 +125% | $96.58 +137% | $102.01 +151% | $108.13 +166% | $115.10 +183% |
| 11.5% | $82.89 +104% | $86.90 +114% | $91.36 +125% | $96.34 +137% | $101.95 +151% |
Institutional Software Quality Scorecard (83/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Disciplined equity compensation well below software industry average
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 150% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 80.8% gross margin and 40.7% Rule of 40 score
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into PRGS?
The current share price only requires -2.6% 5-year CAGR (1.5% dilution-adjusted), well below historical growth of 17.2%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (6.6% of revenue) and annual share dilution (0.8%/yr). Accounting for both requires 1.5% 5-year revenue CAGR to justify $40.69/sh on a true per-share economic cash flow basis.
Progress Software Corporation (PRGS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $977.8M | $977.8M | $1.15B | $1.34B | $1.57B | $1.84B | $2.16B |
| Gross Profit | $790.3M | $790.3M | $926.2M | $1.09B | $1.27B | $1.49B | $1.75B |
| Operating Income (EBIT) | $153.3M | $153.3M | $179.7M | $210.6M | $246.8M | $289.3M | $339.0M |
| Stock-Based Compensation (SBC) | $64.8M | $64.7M | $75.9M | $88.9M | $104.2M | $122.1M | $143.1M |
| Unlevered Free Cash Flow (FCF) | $229.5M | $229.5M | $269.0M | $315.2M | $369.5M | $433.0M | $507.5M |
| SBC-Adjusted True Cash Flow | $164.7M | $164.8M | $193.1M | $226.3M | $265.2M | $310.9M | $364.3M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -31.0 + 0.83 × (Rule of 40) · R² = 85%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Progress Software Corporation | PRGS | $1.75B | $977.8M | 80.8% | 23.5% | 40.7% | 6.6% | 2.6× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 2.6× | $2.51B | $1.75B | $40.69 | 0.0% |
| -20% Multiple Compression | 2.1× | $2.01B | $1.25B | $29.04 | -20.0% |
| -35% Multiple Compression | 1.7× | $1.63B | $875.8M | $20.31 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $4.89B | $4.13B | $95.85 | +94.7% |
Frequently Asked Questions: Progress Software Corporation (PRGS) Valuation
What is Progress Software Corporation (PRGS)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Progress Software Corporation (PRGS) has a Base Case implied value of $114.65 per share (with a Bear Case of $42.66 and a Bull Case of $210.96), compared to its current price of $40.69. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Progress Software Corporation (PRGS)'s Rule of 40 score and Free Cash Flow margin?
Progress Software Corporation achieves a Rule of 40 score of 40.7%, combining a 17.2% revenue growth run-rate with a 23.5% TTM free cash flow margin on $977.8M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into PRGS stock according to Reverse-DCF analysis?
At $40.69 per share (Enterprise Value of $2.51B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of -2.6%, compared to Progress Software Corporation's historical CAGR of 17.2%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Progress Software Corporation compare to Software & Cloud Services software peers?
Progress Software Corporation (PRGS) earns an institutional Software Quality Score of 83/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Progress Software Corporation (PRGS)'s valuation?
Progress Software Corporation recorded $64.8M in TTM stock-based compensation (6.6% of revenue). When treating SBC as a cash-equivalent compensation expense, Progress Software Corporation's SBC-adjusted free cash flow yield is 9.4%, scoring 21/25 on our Shareholder Dilution Friction pillar.