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What: Shares of PROS Holdings
So what: PROS Holdings is looking a bit amateur after reporting a 26% increase in sales to $27 million and $0.10 in non-GAAP income but missing Wall Street's second-quarter forecast. PROS first-quarter results were in line with Wall Street's expectations as management noted the company's software continues to gain acceptance in the sectors it serves. For the second quarter, PROS' forecast calls for $27.2 million to $27.8 million in revenue with non-GAAP income of $0.08 to $0.09. That's marginally below the consensus for $28.2 million and $0.10 in EPS. PROS did mention that it's prone to contract variability and that this weakness in the second quarter would be the primary reason for the EPS and revenue shortfall.
Now what: Application software, specifically revenue management services, is a high-margin sector I like. I can't, however, say that PROS' valuation impresses me. Even with today's market mauling, PROS is valued at 31 times forward earnings and seven times book value. I will give the company credit for its $71 million in cash with no debt, but that's where my praise ends. Until its stock price drops or its profits rise to meet that pricey valuation, I'd send this stock back to the minor leagues.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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