Progress Software Corporation (NASDAQ: PRGS) is trading up again and it is now up more than 10% in just the last few trading sessions. The news today is that Starboard Value LP has sent a letter to Progress’ CEO and its board of directors to address a situation where the company is grossly undervalued. It even brings up the argument that it is worth less than the sun of the parts.
Starboard argues that the Application Development Platforms (ADP) segment is worth as much or more than the entire Progress market value today. It is the argument that a conglomerate structure with a very mature and profitable business is being used. There is the money-losing growth segment which has little to no real overlap. The investor group and its affiliates have now taken a stake of about 5.1% of the stock.
Starboard did at least note that its CEO, Mr. Bhatt, has only recently assumed the CEO role and the group hopes to work with him and the board to explore unlocking the hidden value here.
Progress has a market value of $1.35 billion according to Yahoo! FInance and that is after the 5% jump to $21.47 today. The 52-week range is $16.71 to $31.47. The company is very under-followed by Wall Street analysts and its current value is put at about 2.6-times projected sales and about 17-times projected earnings. Of the few analysts that cover this stock, the consensus price target objective is $22.25. Progress had close to $350 million spread among its cash and short-term and long-term investments with no real long-term debt. The total equity was $671 million and net tangible assets were $367 million.
On the surface this seems like a fully valued company if you just look at the raw data. If the activist investor strategy is half-correct, you have a special situation developing here.
JON C. OGG
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