Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Progress Software Corporation (Nasdaq: PRGS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.
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- PROGRESS SOFTWARE CORP has improved earnings per share by 23.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PROGRESS SOFTWARE CORP increased its bottom line by earning $0.73 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus $0.73).
- PRGS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PRGS has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PROGRESS SOFTWARE CORP is currently very high, coming in at 94.80%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PRGS's net profit margin of 14.89% significantly trails the industry average.
- PRGS has underperformed the S&P 500 Index, declining 7.63% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 64.3% when compared to the same quarter one year ago, falling from $31.12 million to $11.10 million.