All You Need To Know About Pegasystems Inc's (NASDAQ:PEGA) Financial Health

Stocks with market capitalization between $2B and $10B, such as Pegasystems Inc (NASDAQ:PEGA) with a size of US$4.96B, do not attract as much attention from the investing community as do the small-caps and large-caps. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Let’s take a look at PEGA’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into PEGA here. View our latest analysis for Pegasystems

Can PEGA service its debt comfortably?

Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. The good news for investors is that Pegasystems has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors' risk associated with debt is virtually non-existent with PEGA, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Can PEGA meet its short-term obligations with the cash in hand?

Since Pegasystems doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at US$323.99M, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.58x. Generally, for Software companies, this is a reasonable ratio as there's enough of a cash buffer without holding too capital in low return investments.

Next Steps:

PEGA has zero-debt in addition to ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and shareholders, but some level of debt may also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for PEGA's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Pegasystems to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for PEGA’s future growth? Take a look at our free research report of analyst consensus for PEGA’s outlook.
2. Valuation: What is PEGA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PEGA is currently mispriced by the market.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.