PRGS
Progress Software Corporation
$40.35
Platform & Compounding FCF
85%
Two-stage FCF DCF
Mild
·
Conviction
Fair Value
Trading 2.7% below fair value
You pay
$40.35
Bear
$40.43
Fair
$41.47
Bull
$45.92
Bear
$40.43
+0.2%
3% stage 1 growth, 11% discount
Fair
$41.47
+2.8%
3% stage 1 growth, 11% discount
Bull
$45.92
+13.8%
4% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (3% base case)
Terminal Value % of EV
33%
Implied Market Multiple
13.3x
Market is pricing in (growth)
3.5%
vs 3.2% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $50.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $41.47 per share.
Warnings
Stock-based employee pay equals 89% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions