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PEGA

Pegasystems NasdaqGS:PEGA Stock Report

Last Price

US$32.17

Market Cap

US$2.6b

7D

-6.1%

1Y

-75.1%

Updated

27 Sep, 2022

Data

Company Financials +
PEGA fundamental analysis
Snowflake Score
Valuation4/6
Future Growth2/6
Past Performance0/6
Financial Health3/6
Dividends0/6

PEGA Stock Overview

Pegasystems Inc. develops, markets, licenses, hosts, and supports enterprise software applications in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific.

Pegasystems Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Pegasystems
Historical stock prices
Current Share PriceUS$32.17
52 Week HighUS$132.59
52 Week LowUS$31.71
Beta0.96
1 Month Change-11.23%
3 Month Change-34.56%
1 Year Change-75.10%
3 Year Change-53.78%
5 Year Change-45.38%
Change since IPO419.92%

Recent News & Updates

Sep 16

Pegasystems declares $0.03 dividend

Pegasystems (NASDAQ:PEGA) declares $0.03/share quarterly dividend, in line with previous. Forward yield 0.32% Payable Oct. 17; for shareholders of record Oct. 3; ex-div Sept. 30. See PEGA Dividend Scorecard, Yield Chart, & Dividend Growth.

Aug 22

Pegasystems: Rapidly Souring

Shares of Pegasystems have dropped 65% since the start of the year and are unlikely to recover. The company just posted a terrible Q2 earnings quarter in which revenue declined double digits y/y, slipping from a single-digit growth rate previously. Losses accordingly ballooned, which is a disappointment for a company that is so anchored to a Rule of 40 management system. The company's lawsuit loss against Appian also puts a $2 billion cloud over its head, on top of severely damaging its reputation. As volatility returns and clouds the possibilities for a year-end rebound in the markets, I'll continue to emphasize safety and high-quality stocks in my individual stock selection. It's not a great time to make daring bets on turnaround names when so many high-quality growth stocks are trading at incredibly attractive valuations. Pegasystems (PEGA) is one clear example of a legacy software vendor whose fundamental story has been decimated this year. On top of executing poorly amid tightening macro conditions and playing catch-up to newer and better-recognized SaaS names, Pegasystems also suffered an incredible blow in its legal tussle with Appian (APPN). Year to date, shares of Pegasystems have lost 65% of their value. To me, this is a rather permanent loss of value, and investors should not be hoping for a rebound anytime soon. PEGA data by YCharts Admittedly, I was previously bullish on Pegasystems in the past, and I last wrote a supportive note on the stock back in March. At the time, I had praised the company's TAM growth, its consistent single-digit revenue growth amid its cloud transition, ambitions for hitting the Rule of 40 in 2024, and cheap valuation. Since then, however, Pegasystems' fundamental story has changed in two major ways. The first is the Appian case. Appian, for investors who are unfamiliar, is a fellow SaaS vendor that competes in the business process management (BPM) space and also emphasizes low-code software. Appian sued and won a corporate espionage case against Pegasystems. In a nutshell, Pegasystems was found guilty of trade secret appropriation: it hired an employee of a government contractor to provide it with access to Appian software. This contractor then passed information (including video recordings of the Appian development environment) to Pegasystems employees. Pegasystems' CEO, Alan Trefler, was also found to have participated in meetings with this contractor present. Appian won a $2.036 billion judgment in its favor. Now, the case is still undergoing appeals, and it's highly likely that Pegasystems will settle with Appian for a smaller number. But needless to say, the magnitude of this loss is not something Pegasystems can readily afford. As of the end of its most recent quarter, Pegasystems had only $297 million of cash left on its balance sheet, not to mention $592 million of debt. The eventual payment of this verdict would force Pegasystems to take on substantial debt to finance - at the exact time that debt capital is becoming cripplingly expensive. And beyond the financial impact of this case, the damage to Pegasystems' reputation is also irreparable. Among other implications, the public nature of this lawsuit is virtually an admission that Pegasystems isn't capable of competing against modern SaaS names like Appian - to the degree that it had to engage in espionage in a bid to boost its product development. Pegasystems can no longer comfortably say that it's a legacy vendor that is slowly modernizing and catching up to SaaS peers. Outside of the Appian case (or perhaps driven in part by it), Pegasystems' fundamentals have also dramatically soured since the start of the year. We'll cover the company's disappointing Q2 results in the next section, but the bottom line here: Pegasystems' steep 65% price decline since the start of the year is matched by the drastic turn in its fate. I am bearish on the stock now: don't be tempted to buy the dip here; it's far better to move to the sidelines and invest in higher-quality software names instead. Q2 download Let's now cover Pegasystems' latest Q2 results in greater detail. The Q2 earnings summary is shown below: Pegasystems Q2 results (Pegasystems Q2 earnings deck) Pegasystems' revenue in Q2 declined 16% y/y to $274.3 million, dramatically missing Wall Street's expectations of $338.3 million (+4% y/y) by a twenty-point margin, one of the biggest earnings disappointments in the tech sector during the Q2 earnings season. Revenue growth also decelerated twenty-two points versus 6% y/y growth in Q1. Here's some commentary from CEO Alan Trefler on what the company is seeing in the demand landscape, taken from his prepared remarks on the Q23 earnings call: This year has turned out to be an extremely volatile business environment. Our clients faced challenges related to the pandemic, labor shortages, the war in Europe, everything is causing global disruptions as well as, of course, rising inflation, high oil prices, supply chain challenges, economic and security and most recently, currency exchange headwinds [...] At Pega, we're taking the volatility in macroeconomic environment seriously. We're making cost management as much of a priority for us as it is for our clients with us having a focus on operational efficiency and limiting increases to our cost structure. We've paid and staffed to make sure we're staying close to our clients by removing some of the layers that have crept in over the last few years. And by ensuring our talent is directly connected to clients, we believe will both improve outcomes and our long-term relationships." It's a disappointing turn of events for a company whose previous story to Wall Street was one of recovery and catching up to other SaaS names. We also saw weakness in ACV growth in the quarter, another prior highlight for Pega. The company only added $18 million in net-new ACV in the quarter to end Q2 at $1.068 billion, up only 14% y/y on an as-reported basis (with five points of FX impact; constant-currency growth would have been 19% y/y). This compares to 20% ACV growth in Q4.

Shareholder Returns

PEGAUS SoftwareUS Market
7D-6.1%-3.2%-5.8%
1Y-75.1%-31.6%-22.1%

Return vs Industry: PEGA underperformed the US Software industry which returned -34.3% over the past year.

Return vs Market: PEGA underperformed the US Market which returned -23.7% over the past year.

Price Volatility

Is PEGA's price volatile compared to industry and market?
PEGA volatility
PEGA Average Weekly Movement7.7%
Software Industry Average Movement8.8%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: PEGA is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.

Volatility Over Time: PEGA's weekly volatility (8%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19836,133Alan Treflerhttps://www.pega.com

Pegasystems Inc. develops, markets, licenses, hosts, and supports enterprise software applications in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific. It provides Pega Platform, an application development product for clients; and Pega Infinity, a software platform that unifies customer engagement and digital process automation. The company also offers customer engagement applications, including Pega Customer Decision Hub that enable enterprises to enhance customer acquisition and experiences across inbound, outbound, and paid media channels; Pega Sales Automation to automate and manage the sales process; and Pega Customer Service to anticipate customer needs, connect customers to people and systems, and automate customer interactions to evolve the customer service experience, as well as to allow enterprises to deliver interactions across channels and enhance employee productivity.

Pegasystems Inc. Fundamentals Summary

How do Pegasystems's earnings and revenue compare to its market cap?
PEGA fundamental statistics
Market CapUS$2.64b
Earnings (TTM)-US$380.39m
Revenue (TTM)US$1.22b

2.2x

P/S Ratio

-6.9x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
PEGA income statement (TTM)
RevenueUS$1.22b
Cost of RevenueUS$352.70m
Gross ProfitUS$870.40m
Other ExpensesUS$1.25b
Earnings-US$380.39m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-4.64
Gross Margin71.16%
Net Profit Margin-31.10%
Debt/Equity Ratio442.6%

How did PEGA perform over the long term?

See historical performance and comparison

Dividends

0.4%

Current Dividend Yield

-3%

Payout Ratio

Does PEGA pay a reliable dividends?

See PEGA dividend history and benchmarks
When do you need to buy PEGA by to receive an upcoming dividend?
Pegasystems dividend dates
Ex Dividend DateSep 30 2022
Dividend Pay DateOct 17 2022
Days until Ex dividend1 day
Days until Dividend pay date18 days

Does PEGA pay a reliable dividends?

See PEGA dividend history and benchmarks