On Thursday, TD Cowen adjusted its outlook on PROG Holdings (NYSE:PRG), increasing the price target to $40.00 from the previous $38.00, while reaffirming a Buy rating on the stock. The revision follows PROG Holdings' recent financial performance, which surpassed analyst expectations. The company's earnings beat was attributed to a lower-than-anticipated provision in its lending segment, a result of subdued balance growth that counteracted an uptick in losses.
The financial report highlighted that PROG Holdings' revenue exceeded projections, but this was solely due to elevated interest and fees from loans, reflecting a higher yield. The core leasing business's revenue met the analyst's predictions and exceeded the consensus. Additionally, savings in Selling, General and Administrative (SG&A) expenses contributed to the company's earnings surpassing estimates.
TD Cowen's analysis also noted that despite higher depreciation of lease merchandise affecting the company, the impact on gross margin was mitigated by the normalization of early buyout levels. This balance between increased costs and operational efficiencies played a crucial role in the earnings beat.
The firm's assessment suggests that PROG Holdings is managing its lending and leasing operations effectively, particularly in controlling expenses and optimizing revenue streams. The increase in the price target to $40.00 reflects confidence in the company's continued financial health and operational performance.
InvestingPro Insights
PROG Holdings' recent financial performance and analyst optimism are further supported by key metrics from InvestingPro. The company boasts a market capitalization of $1.54 billion and is trading at an attractive P/E ratio of 13.31, which is even more compelling when considering the adjusted P/E ratio for the last twelve months as of Q1 2024 at 5.86. This indicates that the stock may be undervalued relative to its near-term earnings growth potential. Additionally, with a PEG ratio for the same period at a mere 0.18, it suggests that the company's earnings growth rate is outpacing its P/E ratio, potentially signaling a good investment opportunity.
InvestingPro Tips highlight that management's aggressive share buybacks and the positive revisions by 2 analysts for the company's upcoming earnings could be indicative of internal confidence and external expectations of continued financial strength. Moreover, with a significant return of 15.55% over the last week, investors may be witnessing the market's favorable reaction to the company's prospects.
For those seeking a deeper dive into PROG Holdings' performance and potential, there are additional InvestingPro Tips available that could offer valuable insights. With the use of the exclusive coupon code PRONEWS24, readers can access these insights at a discounted rate on a yearly or biyearly Pro and Pro+ subscription. This could be a timely opportunity to make informed investment decisions, especially given the company's profitability over the last twelve months and the analysts' prediction of profitability this year.
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