PROG (PRG)

Financial technology company PROG Holdings (NYSE:PRG) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 1.8% year on year to $595.1 million. On the other hand, the company’s full-year revenue guidance of $2.42 billion at the midpoint came in 2.1% below analysts’ estimates. Its non-GAAP profit of $0.90 per share was 21.6% above analysts’ consensus estimates.

Company Overview

Evolving from its origins as Aaron's, Inc. before rebranding in 2020, PROG Holdings (NYSE:PRG) provides alternative payment solutions including lease-to-own options and second-look credit products for consumers who may not qualify for traditional financing.

Specialty finance companies provide targeted lending or financial services for specific industries or needs. They benefit from expertise in particular sectors, often reduced competition in specialized niches, and tailored underwriting that can yield higher margins. Challenges include concentration risk in specific industries, difficulty achieving scale efficiencies, and potential vulnerability during sector-specific downturns affecting their specialized markets.

PROG Holdings competes with traditional rent-to-own providers like Rent-A-Center (NASDAQ:RCII) and Conn's (NASDAQ:CONN), as well as with financial technology companies offering alternative payment solutions such as Affirm (NASDAQ:AFRM), Katapult (NASDAQ:KPLT), and privately-held Acima.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, PROG struggled to consistently increase demand as its $2.51 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. PROG’s annualized revenue growth of 1.3% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, PROG’s revenue fell by 1.8% year on year to $595.1 million but beat Wall Street’s estimates by 1.5%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Specialty Finance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The pre-tax profit margin includes interest because it's central to how financial institutions generate revenue and manage costs. Tax considerations are excluded since they represent government policy rather than operational performance, giving investors a clearer view of business fundamentals.

Over the last four years, PROG’s pre-tax profit margin has risen by 5.5 percentage points, going from 13% to 7.5%. It has also declined by 1.6 percentage points on a two-year basis, showing its expenses have consistently increased at a faster rate than revenue. This usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, PROG’s pre-tax profit margin was 7.7%. This result was in line with the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for PROG, its EPS declined by 6.2% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For PROG, its two-year annual EPS declines of 2% show it’s still underperforming. These results were bad no matter how you slice the data.

In Q3, PROG reported adjusted EPS of $0.90, up from $0.77 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects PROG’s full-year EPS of $3.62 to shrink by 3.3%.

Financial firms are valued based on their balance sheet strength and ability to compound book value across diverse business lines.

This explains why tangible book value per share (TBVPS) is a premier metric for the sector. TBVPS provides concrete per-share net worth that investors can trust when evaluating companies with complex, multi-faceted business models. On the other hand, EPS is often distorted by the diverse nature of operations, mergers, and various accounting treatments across different business units. Book value provides clearer performance insights.

PROG’s TBVPS declined at a 12.9% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 38.2% annually over the last two years from $4.58 to $8.74 per share.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, PROG has averaged an ROE of 23.4%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This is a bright spot for PROG.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

PROG currently has $602.7 million of debt and $703.6 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.9×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

It was good to see PROG beat analysts’ EPS expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. On the other hand, its full-year revenue guidance missed. Overall, this print had some key positives. The stock traded up 1.7% to $33.33 immediately following the results.

Updated: December 4, 2025 at 11:34 PM EST

Before making an investment decision, investors should account for PROG’s business fundamentals and valuation in addition to what happened in the latest quarter.

PROG falls short of our quality standards. For starters, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its stellar ROE suggests it has been a well-run company historically, the downside is its declining pre-tax profit margin shows the business has become less efficient. On top of that, its TBVPS has declined over the last five years.

PROG’s P/E ratio based on the next 12 months is 8.7x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $38.71 on the company (compared to the current share price of $29.56).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.