PROG trades at $30.61 per share and has stayed right on track with the overall market, gaining 9.6% over the last six months. At the same time, the S&P 500 has returned 13.6%.
Is there a buying opportunity in PROG, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Do We Think PROG Will Underperform?
We're cautious about PROG. Here are three reasons there are better opportunities than PRG and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.
Unfortunately, PROG struggled to consistently increase demand as its $2.51 billion of revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for PROG, its EPS declined by 6.2% 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. Growing TBVPS Reflects Strong Asset Base
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.
Although PROG’s TBVPS declined at a 12.9% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at an incredible 38.2% annual clip (from $4.58 to $8.74 per share).
Final Judgment
PROG doesn’t pass our quality test. That said, the stock currently trades at 8.7× forward P/E (or $30.61 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.
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