Pegasystems (PEGA) AI Stock Analysis

• Market Cap: $5.97B
• Dividend Yield: 0.17%
• Average Volume (3M): 926.96K
• Price to Earnings (P/E): 62.8
• Beta (1Y): 1.07
• Revenue Growth: 4.51%
• EPS Growth: 43.29%
• Country: US
• Employees: 5,443
• Sector: Technology
• Sector Strength: 44
• Industry: Software - Application
• EPS (TTM): 1.01
• Shares Outstanding: 85,898,880
• 10 Day Avg. Volume: 765,118
• 30 Day Avg. Volume: 926,960
• PEG Ratio: 1.45
• Price to Book (P/B): N/A
• Price to Sales (P/S): 4.18
• Price to Cash Flow (P/CF): 16.40
• P/FCF Ratio: 16.40
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $110.63
• Price Target Upside: 59.13% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 9

Pegasystems shows strong financial performance and strategic growth initiatives, but faces technical headwinds and valuation concerns. While the company is on a positive trajectory financially, technical indicators and a high P/E ratio suggest caution.

Positive Factors

Guidance and Free Cash Flow

The company’s guidance for ACV growth and free cash flow came in above the Street.

Innovation and Future Growth

The announcement of the Pega Agent Experience, incorporating AI agents, demonstrates innovation and potential for future growth.

Market Recognition

Pegasystems is identified as a Leader in Gartner’s new Magic Quadrant for Enterprise Low-Code Application Platforms, alongside major SaaS players.

Negative Factors

ACV Growth Expectations

Pega reported mixed fourth-quarter results as constant-currency ACV growth of 11% came in below consensus expectations.

Future Performance Uncertainty

Mixed guidance for 2025 led to a decline in stock value, reflecting market uncertainty about future performance.

Pega Cloud Performance

Pega Cloud ACV growth slowed down and missed consensus expectations, impacting overall sentiment.

Pegasystems Business Overview & Revenue Model

Company Description

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. In addition, it provides intelligent automation software; Pega Cloud that allows clients to develop, test, and deploy applications and the Pega Platform using an Internet-based infrastructure; Pega Academy, which offers instructor-led and online training to its employees, clients, and partners; and guidance, implementation, and technical support services. The company primarily markets its software and services to financial services, life sciences, healthcare, communications and media, government, insurance, manufacturing and high tech, and consumer services markets through a direct sales force, as well as partnerships with technology providers and application developers. Pegasystems Inc. was incorporated in 1983 and is headquartered in Cambridge, Massachusetts.

How the Company Makes Money

Pegasystems makes money primarily through the sale of software licenses, subscriptions, and maintenance services. The company offers its software solutions through both perpetual licenses and cloud-based subscription models, generating recurring revenue streams. Additionally, PEGA provides professional services, including consulting and training, which contribute to its revenue. The company's growth is supported by strategic partnerships with major consulting firms and technology providers, which help expand its reach and implementation capabilities. Key factors influencing its earnings include the increasing demand for digital transformation and automation solutions across industries, driving adoption of its low-code platform.

Pegasystems Financial Statement Overview

Summary

Pegasystems has demonstrated strong revenue growth with a consistent increase in total revenue and improved margins. The company has shown substantial financial improvement across key areas, despite historical volatility in income and previously high leverage levels.

Income Statement

Pegasystems has demonstrated strong revenue growth with a consistent increase in total revenue over the years, culminating in a 4.5% increase from 2023 to 2024. The gross profit margin is robust at 73.9% in 2024, indicating efficient production and service delivery. The EBIT and EBITDA margins have shown significant improvement, with EBIT margin rising to 8.3% in 2024 from 5.6% in 2023, reflecting enhanced operational efficiency. Net profit margin has improved to 6.6%, up from 4.7%, showcasing better profitability. However, the company has experienced volatility in net income in the past, which poses a potential risk.

Balance Sheet

The company has strengthened its financial position with a debt-to-equity ratio of 0.91 in 2024, down from 1.64 in 2023, indicating improved leverage management. The return on equity has improved significantly to 16.9% in 2024, up from 19.2% in 2023, highlighting better profitability from shareholders' investments. The equity ratio stands at 33.1%, reflecting a moderate level of equity financing. Despite these improvements, the high levels of previous leverage remain a concern.

Cash Flow

Pegasystems has shown remarkable improvement in cash flow metrics, with a substantial increase in operating cash flow to net income ratio, reaching 3.49 in 2024 from 3.21 in 2023, indicating strong cash generation relative to net income. Free cash flow has also grown significantly, with a notable free cash flow to net income ratio of 3.49, showcasing robust cash management. The free cash flow growth rate is impressive, demonstrating the company's ability to generate cash for reinvestment and debt reduction.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
1.50B	1.43B	1.32B	1.21B	1.02B
	Gross Profit
1.11B	1.05B	949.21M	875.29M	706.60M
	EBIT
123.88M	80.95M	-87.66M	-94.73M	-143.53M
	EBITDA
184.90M	121.06M	-119.28M	-94.73M	-67.94M
	Net Income Common Stockholders
99.19M	67.81M	-345.58M	-63.04M	-61.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
739.97M	423.34M	297.22M	362.78M	465.17M
	Total Assets
1.77B	1.51B	1.36B	1.59B	1.60B
	Total Debt
549.67M	581.27M	687.74M	678.54M	518.20M
	Net Debt
212.56M	351.37M	542.68M	518.58M	346.30M
	Total Liabilities
1.18B	1.16B	1.23B	1.18B	1.06B
	Stockholders Equity
585.48M	353.84M	130.84M	416.09M	542.17M
Cash Flow		Free Cash Flow
345.93M	201.00M	-13.04M	28.66M	-25.93M
	Operating Cash Flow
345.93M	217.78M	22.34M	39.12M	-563.00K
	Investing Cash Flow
-202.58M	-50.75M	13.07M	72.50M	-321.68M
	Financing Cash Flow
-30.21M	-81.96M	-46.99M	-121.84M	423.45M

Pegasystems Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 69.52
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Negative. The current price of 69.52 is below the 20-day moving average (MA) of 73.13, below the 50-day MA of 87.05, and below the 200-day MA of 78.47, indicating a bearish trend. The MACD of -3.59 indicates Negative momentum. The RSI at 35.09 is Neutral, neither overbought nor oversold. The STOCH value of 21.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PEGA.

Pegasystems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	81 Outperform	$2.82T	30.51	34.29%	0.83%	15.04%	12.38%
INTU	79 Outperform	$167.44B	55.97	17.43%	0.65%	13.73%	9.93%
ADBE	75 Outperform	$164.39B	25.26	47.28%	―	10.65%	44.84%
CRM	75 Outperform	$259.44B	42.43	10.26%	0.59%	8.72%	51.47%
PEGA	68 Neutral	$5.97B	62.82	21.12%	0.17%	4.51%	43.29%
ORCL	67 Neutral	$395.03B	33.10	108.79%	1.14%	6.23%	12.37%
Sector *	57 Neutral	$20.97B	10.32	-14.01%	2.49%	4.46%	-23.38%

Pegasystems Corporate Events

Pegasystems Completes Repayment of Convertible Notes

On March 3, 2025, Pegasystems Inc. announced the full repayment of its 0.75% Convertible Senior Notes, initially issued in February 2020, for $469.6 million. This repayment marks a significant milestone in Pega’s transition to a subscription-based business model and reflects its achievement of Rule of 40 status, underscoring the company’s robust business model and disciplined capital allocation strategy.

Pegasystems Approves 2025 Executive Incentive Plan

On February 4, 2025, Pegasystems Inc. announced the approval of its 2025 Section 16 Officer/ALT Member Corporate Incentive Compensation Plan, aimed at rewarding executive officers based on the achievement of financial and strategic goals. The plan, which spans from January 1 to December 31, 2025, includes options for executives to receive part of their bonuses as restricted stock units, contingent upon continued employment and performance. This initiative emphasizes Pegasystems’ commitment to aligning executive incentives with company performance, potentially impacting its operational efficiency and market competitiveness.

Pegasystems Expands Board with Rohit Ghai Appointment

On January 16, 2025, Pegasystems Inc. appointed Rohit Ghai to its board of directors, expanding the board from seven to eight members. Ghai, with over two decades of leadership in the enterprise software industry and expertise in digital transformation and cybersecurity, is expected to enhance Pega’s strategic direction as the company continues to innovate with offerings like generative AI. His insights are anticipated to aid Pega in navigating innovation and growth in a rapidly evolving technological landscape.