With a daily gain of 8.75%, a three-month gain of 21.58%, and a Loss Per Share of 1.39, Pros Holdings Inc (PRO, Financial) has caught the attention of investors. This article aims to answer the question: Is Pros Holdings' stock fairly valued? Let's delve into a detailed valuation analysis of Pros Holdings.
Company Overview
Pros Holdings Inc. is a leading provider of cloud-based revenue and profit realization software solutions to business-to-business and business-to-consumer companies. The company's solutions assist customers in growing revenue, modernizing business processes, and supporting profitability by leveraging prescriptive analytics and data science-based decision-making technology. Pros Holdings generates revenue in the United States, Europe, Africa, Asia-Pacific, and Middle East regions. Comparing the stock price of $34.79 to the GF Value of $34.28, it appears that Pros Holdings' stock is fairly valued.
Understanding GF Value
The GF Value is an exclusive measure that represents the current intrinsic value of a stock. It is derived from historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line indicates the fair value at which the stock should be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on GuruFocus' valuation method, Pros Holdings (PRO, Financial) is believed to be fairly valued. As the stock is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Assessing the financial strength of a company is crucial before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage provide valuable insights into a company's financial strength. Pros Holdings has a cash-to-debt ratio of 0.57, which is worse than 73.84% of 2752 companies in the Software industry. The overall financial strength of Pros Holdings is 3 out of 10, indicating that its financial strength is poor.
Profitability and Growth
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Pros Holdings has been profitable 1 year over the past 10 years. During the past 12 months, the company had revenues of $290.30 million and a Loss Per Share of $1.39. Its operating margin of -21.78% is worse than 74.54% of 2785 companies in the Software industry. Overall, GuruFocus ranks Pros Holdings' profitability as poor.
Growth is a critical factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Pros Holdings is -0.7%, which ranks worse than 71.29% of 2414 companies in the Software industry. The 3-year average EBITDA growth rate is -10.1%, which ranks worse than 76.18% of 2007 companies in the Software industry. GuruFocus ranks Pros Holdings' growth as poor.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Pros Holdings' ROIC was -19.15, while its WACC came in at 8.47.
Conclusion
Overall, Pros Holdings (PRO, Financial) stock is believed to be fairly valued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 76.18% of 2007 companies in the Software industry. To learn more about Pros Holdings stock, you can check out its 30-Year Financials here.
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