3 Reasons PRG is Risky and 1 Stock to Buy Instead

PROG has had an impressive run over the past six months as its shares have beaten the S&P 500 by 10.4%. The stock now trades at $34.71, marking a 19% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy PROG, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think PROG Will Underperform?

Despite the momentum, we're sitting this one out for now. Here are three reasons why PRG doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

Unfortunately, PROG’s 1.2% annualized revenue growth over the last five years was weak. This was below our standards.

2. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for PROG, its EPS declined by 2.2% annually over the last five years while its revenue grew by 1.2%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Growing TBVPS Reflects Strong Asset Base

In the financials industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.

Although PROG’s TBVPS declined at a 13.2% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at an incredible 35% annual clip (from $4.26 to $7.76 per share).

Final Judgment

We cheer for all companies supporting the economy, but in the case of PROG, we’ll be cheering from the sidelines. With its shares topping the market in recent months, the stock trades at 10.6× forward P/E (or $34.71 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.

Stocks We Like More Than PROG

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