PROS Holdings: A Way to Play Commodity Inflation?

In a slow economic environment, companies like ConAgra (NYSE: CAG ) tend to
perform quite well. Yet this year, the shares are up only about 2%. The issue?
Well, a big culprit is commodity inflation. For example, in ConAgra's latest
earnings report, there was a 42% drop in earnings primarily because of the
margin squeeze from raw materials. Of course, ConAgra is not alone. Other
companies including Kellogg (NYSE: K ), Kraft (NYSE: KFT ) and General Mills
(NYSE: GIS ) are having difficulties, too. It looks like commodity inflation is
not a short-term trend. After all, it is getting tougher to extract natural
resources, and China and India continue to provide substantial demand. As a
result, companies are looking for innovative ways to deal with inflation
pressures, such as by using pricing software. And one of the top operators in
the business is PROS Holdings (NYSE: PRO ). Founded in the mid-1980s, the
company has developed sophisticated algorithms, which are based on operations
research, statistics and forecasting techniques. The software also leverages
data from corporate information systems. Once a PROS system is installed, it
provides a more scientific approach to pricing. For example, it will identify
detrimental actions such as unnecessary discounts and rebates as well as
opportunities to boost profitability. In today's markets, getting even a small
improvement in margins can be a big deal. So it should be no surprise that PROS
is gaining traction with customers. In the latest quarter, the company boosted
revenues by 33% to $23.8 million and registered a profit of $1.4 million. As of
now, PROS has more than 150 customers across 50 countries. Actually, PROS has
enjoyed plenty of momentum with its cloud-based offerings, and the company is
making inroads in emerging markets, including in Asia. At the same time, PROS
has been aggressively forging partnerships, such as with Deloitte Consulting and
L&T Infotech. With a market cap of $612 million, PROS still is fairly small. But
investors are starting to take notice. During the past year, shares have
increased a sizzling 56%. And in light of the company's strong platform and
positive long-term industry trends, it's reasonable to assume the momentum
will continue. Interestingly enough, PROS also could be an attractive buyout
candidate for a major software operator like Oracle (NASDAQ: ORCL ) or IBM
(NYSE: IBM ). These companies understand that pricing software should be a nice
growth opportunity for the long haul. Tom Taulli is the author of "All About
Short Selling" and "All About Commodities." You can also find him at
Twitter account @ttaulli. He does not own a position in any of the stocks named
here.