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By George Leong, B.Comm. Published : March 18, 2020
PROS Holdings Stock a Bargain After Irrational Selling
Watching the stock market recently has been brutal. The degree of panic selling was so excessive that, unlike in January, there are now stocks trading at bargain prices. A bottom may not be here yet, but investors might want to nibble at opportunities such as digital commerce technology company PROS Holdings, Inc. (NYSE:PRO).
PRO stock had been sizzling on the chart, up nearly 100% to a high of $76.40 in August 2019. But the recent panic selling drove PROS Holdings shares down to a 52-week low of $28.49 on March 13, down 31% in five days and down 49% over a period of three months.
Therefore, PROS Holdings stock looks like a bargain right now.
My bullish thesis for PROS Holdings, Inc. is that demand is high for artificial intelligence (AI) software solutions to help companies drive their digital commerce strategies.
The rate of the selling capitulation for PRO stock is extremely technically oversold. This implies that the stock market sold irrationally.
PROS Holdings stock blew below its 50-day moving average and the downside support channel between $45.00 and $52.50.
Chart courtesy of StockCharts.com
Strong Revenue Growth and Pathway to Profits Will Lift PRO Stock
PROS Holdings, Inc. did very little noteworthy until 2018, when revenues exploded by 16.7%, followed by growth of 27% to a record $250.3 million in 2019.
| Fiscal Year | Revenues (Millions) | Growth |
| 2015 | $168.3 | |
| 2016 | $153.3 | -8.9% |
| 2017 | $168.8 | 10.1% |
| 2018 | $197.0 | 16.7% |
| 2019 | $250.3 | 27.0% |
(Source: “PROS Holdings Inc.” MarketWatch, last accessed March 16, 2020.)
Revenues are expected to continue to ramp higher by 15.2% to $288.4 million in 2020 and by 18.9% to $342.9 million in 2021. (Source: “PROS Holdings, Inc. (PRO),” Yahoo! Finance, last accessed March 16, 2020.)
PRO Holdings has yet to deliver positive earnings before interest, taxes, depreciation, and amortization (EBITDA), but there is a pathway toward profitability in 2021.
| Fiscal Year | EBITDA (Millions) | Growth |
| 2015 | -$42.2 | |
| 2016 | -$55.9 | -32.4% |
| 2017 | -$53.7 | 3.9% |
| 2018 | -$36.1 | 32.8% |
| 2019 | -$37.6 | -4.2% |
(Source: MarketWatch, op. cit.)
The following table shows the company’s generally accepted accounting principles (GAAP) earnings per share (EPS) in the past five years.
| Fiscal Year | GAAP Diluted EPS | Growth |
| 2015 | -$2.23 | |
| 2016 | -$2.47 | -11.0% |
| 2017 | -$2.46 | 0.4% |
| 2018 | -$1.86 | 24.2% |
| 2019 | -$1.72 | 7.9% |
(Source: MarketWatch, op. cit.)
PROS Holdings, Inc. is estimated to report an adjusted loss of $0.34 per diluted share in 2020 and narrow this to a loss of $0.02 in 2021. (Source: Yahoo! Finance, op. cit.)
The forward price-to-earnings (P/E) ratio for PROS Holdings stock is still high, but the fact that the company is profitable is encouraging.
On a quarterly basis, PROS Holdings has managed to beat the consensus EPS in 13 of 15 quarters, dating back to the start of 2016.
The company only recorded positive free cash flow in 2015 and 2018, but the move toward profitability will help.
Analyst Take
The recent selling capitulation in PRO stock was extremely overdone.
My view is that the major weakness in PROS Holdings stock presents an intriguing opportunity: a high-prospects technology growth stock at a major discount. That’s why PROS Holdings, Inc. is worth watching.
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