We haven't written a whole lot about little enterprise software maker Progress
Since our last report on the company more than a year ago, authored by Foolish colleague and tech expert Tom Taulli, the company has been holding up just fine against the likes of competitors Siebel
Note that analysts express their projections/results in their own secret "pro forma" dialect, which is a distant relative of Sanskrit and equally comprehensible to most investors. In reality, under generally accepted accounting principles (GAAP), Progress earned only $0.28 per diluted share in net profits in the year-ago quarter and will, accordingly, likely report far less than $0.37 in net profits tomorrow (the firm itself projects $0.31 to $0.32 net).
Similarly, the firm's $0.82 in net profits per diluted share for the full fiscal year 2004 translated into $0.99 per share in pro forma-speak. (In case you forgot, that's the language Wall Street will be speaking in when it decides whether Progress hit or missed the targeted $1.33 in full fiscal year pro forma profits tomorrow.)
Confused yet? Then let us free you of the chaos. Ignore the analysts. Ignore the pro forma-speak. Focus on the cash. So far this fiscal year, Progress has generated $58 million in free cash flow. That's a 17% improvement over last year's $49.5 million. It's also a good 66% higher than the $34.9 million GAAP permits the firm to report as its net profits. On a run-rate basis, we'd therefore expect Progress to close out its fiscal year by reporting approximately $77 million in total free cash flow for the year tomorrow.
If it can accomplish that feat, Progress will have a price-to-free cash flow ratio of 16, which, compared to its return on equity of 15%, makes the firm look, at best, fairly priced. Consider, however, that Progress also has a quarter of a million dollars in the bank, so fully 20% of its market cap is backed by cold, hard cash.
In this Fool's book, that would make Progress a "buy."
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Fool contributor Rich Smith does not own shares of any company named above.