We recently published a list of 10 Worst Affordable Stocks To Buy Right Now. In this article, we are going to take a look at where Progress Software Corporation (NASDAQ:PRGS) stands against other worst affordable stocks to buy right now.
In one of our recent articles regarding the 10 Hot Penny Stocks On the Move, we discussed how the overall macroeconomic conditions have played a crucial role in building an environment leading to the upcoming Fed rate cut. Here’s an excerpt from the piece:
“The economy of the United States has stabilized, the risks of a recession have been delayed, and inflation continues to cool down. On August 30, Reuters reported that the Federal Reserve received a fresh confirmation regarding inflation continuing to ease. The personal consumption expenditure price index rose 2.5% year-over-year in July and inflation has stayed within the 2% goal set by the Fed. Fed Chairman has indicated that the “time has come to cut rates”.
Moreover, in another report by Reuters on the same day there were reports of the US dollar gaining as another key inflation measure fell in line with the forecasts. The Fed is expected to cut rates by 25 basis points this month. Moving forward markets have forecasted 100 bps of cuts by the end of 2024.
The stock market is already riding the tide of expected interest rate cuts. On August 20, CNBC reported that the stock market was climbing yet again, putting the S&P 500 and NASDAQ on track for their eighth positive session in a row, marking their longest winning streak this year.”
While there has been a debate about a 25-point or a 50-point cut, the market has fluctuated before the announcement. On September 17, CNBC reported that the S&P 500 was lower after reaching a record high on Tuesday. The market reached a new record high of 5,670.81 and was down 0.1% at 5,627. The Nasdaq moved 0.1% higher whereas the Dow Jones fell by 40 points.
The traders have overcome the summer headwinds and moved past the concerns over the health of the US economy on the back of expectations of the Fed cutting interest rates. On the other hand, Wall Street has been on hold. Analysts are hoping the rate cuts will help boost the earnings growth for companies.
Tom Lee, Fundstrat Global Advisors co-founder, joined CNBC to talk about how the market is expected to perform moving into the fed rate cuts and after the announcement. Lee believes that one of the factors leading to confusion among investors is the election period. The market is expected to stay in a fluctuating environment for the next eight weeks until the elections are over. However, fed rate cuts are coming at a crucial time to give some positive for the market.
There are two main reasons leading up to the rate cuts, one being the inflation easing and the other being the slower labor market that needs help from the Federal Reserve. Moreover, Lee thinks that regardless of the Fed deciding on a 25-point or 50-point cut, the result is going to be positive for the market. He thinks that investors should be confident for the next 12 months as whenever the Fed cuts rates, the win ratio for the markets has been almost 100%. Moreover, the markets rally post-elections regardless of who takes the seat.
Our Methodology
For compiling the list of 10 worst affordable stocks to buy right now, we used the Finviz stock screener. We set our filters to get affordable stocks with high short interest i.e. stocks trading below the market average Forward P/E which is 23.79, expecting positive earnings growth this year, and have high short interest. From the list of affordable stocks, we selected 20 stocks that were most widely held by institutional investors. Once we had the aggregated list, we ranked them based on their Short % of Shares Outstanding, sourced from Yahoo Finance. Please note that the list is ranked in ascending order of the short interest.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A software engineer working in front of a computer, surrounded by code.
Forward P/E Ratio: 12.19
Earnings Growth This Year: 9.20%
Number of Hedge Fund Holders: 27
Short % of Shares Outstanding: 11.55%
Progress Software Corporation (NASDAQ:PRGS) is a technology company that helps businesses create, manage, and deploy their applications smoothly. Some of the key services provided by the company include application development, data management, infrastructure management, infrastructure automation, and consulting services regarding project management and custom software development.
PRGS is trading at only 12 times its forward earnings with earnings expected to grow by 9.20% during the year, thereby making it an affordable stock.
While the short interest is high at 11.55%, it is still held by 27 institutional investors, with stakes worth $173.8 million. Renaissance Technologies is the top holder with a position worth $61 million.
To date the company has more than 100,000 enterprises running their business systems through solutions provided by Progress Software Corporation (NASDAQ:PRGS) and more than 6 million business users work on apps running on Progress technologies.
Management’s focus on artificial intelligence integration and mergers and acquisitions are proving to be successful for the company. Its Q2 revenues were above the higher end of guidance at $175 million. Moreover, earnings per share also exceeded guidance by $0.12 and was recorded at $1.09 for the quarter.
A few acquisitional highlights during the quarter include Progress Software Corporation (NASDAQ:PRGS) acquiring ShareFile, a business unit group of Cloud Software Group. The newly added technology will strategically enhance Progress’ Digital Experience portfolio and enable organizations to deliver effective team collaboration.
Moreover, as a step to unlock AI capabilities, the company released early access to Progress MarkLogic Server 12, which will enable customers to easily integrate generative AI into their businesses. MarkLogic Server 12 has enhanced the relevance and accuracy of AI responses and a single API will allow users to harness the power of AI faster.
Progress Software Corporation (NASDAQ:PRGS) has raised its full-year guidance and now expects revenue between $725 million and $735 million, with EPS between $4.70 and $4.80.
Diamond Hill Small Cap Fund made the following comment about Progress Software Corporation (NASDAQ:PRGS) in its Q3 2023 investor letter:
“Progress Software Corporation (NASDAQ:PRGS) is a diversified, multi-product infrastructure software business with high customer retention and cash-generation capabilities. Its key solutions center around data management and IT environment monitoring — a stable core business which is growing nicely. Over time, we anticipate shareholders should benefit from value-generating M&A — a possibility which the current share price fails to reflect. We also like the management team, which we think is capable and pragmatic.”
Overall PRGS ranks 9th on our list of the worst affordable stocks to buy right now. While we acknowledge the potential of PRGS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PRGS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
