DA Davidson has maintained a Buy rating on Progress Software (NASDAQ: NASDAQ:PRGS) with a steady price target of $65.00.
Progress Software has announced its plans to acquire ShareFile, a document-centric collaboration platform, for approximately $875 million, which translates to around 3.6 times the annualized revenue of roughly $240 million.
The transaction is slated for completion in FY24, and Progress has affirmed its third-quarter guidance ahead of the September 24 report.
The acquisition of ShareFile, a Cloud Software Group subsidiary, represents a significant expansion for Progress, accounting for about 30% of its total revenues.
ShareFile has been experiencing growth in the mid to high single digits. Post-acquisition, as ShareFile's margins are aligned with Progress's standards, its growth is anticipated to stabilize in the low single digits, similar to the rest of Progress's business.
Currently, ShareFile's margins stand at approximately 20%. However, Progress's management team projects that operating margins will exceed 40% after the integration process, which is expected to be completed within approximately 12 months.
ShareFile operates as a cloud-native SaaS entity with a fully recurring revenue model and a net retention rate exceeding 100%.
The endorsement of the acquisition by DA Davidson reflects the firm's confidence in Progress Software's strategic move.
Moreover, in light of recent developments, Progress Software has provided an update on its financial expectations. The company anticipates that the revenue and adjusted earnings per share for its fiscal third quarter will meet or exceed the upper range of its previous forecast.
In a separate development, Progress Software reported robust financial results for the second quarter of 2024, with revenues and earnings per share outperforming expectations. The company announced revenues of $175 million and earnings per share of $1.09.
InvestingPro Insights
As Progress Software (NASDAQ:PRGS) gears up for the acquisition of ShareFile and the release of its third-quarter guidance, InvestingPro data reveals a robust financial backdrop for the company. With a market capitalization of $2.39 billion and an impressive gross profit margin of 85.91% over the last twelve months as of Q2 2024, Progress Software stands on solid ground. The company's revenue has grown by 9.36% during the same period, indicating a healthy expansion trajectory.
InvestingPro Tips highlight the company's financial health and potential for growth. Analysts predict that Progress Software will be profitable this year, with net income expected to grow. Furthermore, the company's valuation implies a strong free cash flow yield, which could be appealing to investors looking for companies with the ability to generate cash. For those interested in a deeper analysis, there are 6 additional InvestingPro Tips available, offering more nuanced insights into Progress Software's performance and prospects.
These metrics and insights could be particularly relevant for investors considering the recent acquisition announcement and DA Davidson's positive outlook on the company's strategic direction. As Progress Software continues to diversify its offerings and strengthen its market position, these InvestingPro Insights offer a valuable perspective on the company's financial health.
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