Pegasystems (PEGA) AI Stock Analysis

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Pegasystems

(NASDAQ:PEGA)

76Outperform

Pegasystems Inc. shows a robust financial performance with strong revenue and profit growth, alongside efficient cash flow management. The technical analysis indicates caution due to potential overbought conditions and negative momentum. Valuation remains a concern with a high P/E ratio, though positive earnings call sentiment and strategic initiatives bolster confidence in future growth.

Positive Factors

Financial performance

Pegasystems reported higher-than-expected non-GAAP EPS and operating margin, showcasing strong operational performance.

Innovation

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

Share repurchase program

Pega announced that its board authorized an additional $500 million share-repurchase program, enhancing the company’s capital-allocation strategy.

Negative Factors

Growth concerns

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

Market uncertainty

Recent headwinds from DOGE and tariffs have created some uncertainty in the market.

Mixed guidance

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

Pegasystems (PEGA) vs. S&P 500 (SPY)

Market Cap

$8.42B

Dividend Yield0.12%

Average Volume (3M)997.09K

Price to Earnings (P/E)48.1

Beta (1Y)1.29

Revenue Growth14.29%

EPS Growth151.38%

CountryUS

Employees5,443

SectorTechnology

Sector Strength77

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.53

Shares Outstanding85,582,250

10 Day Avg. Volume707,556

30 Day Avg. Volume997,089

Financial Highlights & Ratios

PEG Ratio0.41

Price to Book (P/B)13.08

Price to Sales (P/S)0.00

P/FCF Ratio22.06

Enterprise Value/Market Cap0.93

Enterprise Value/Revenue1.28

Enterprise Value/Gross Profit6.28

Enterprise Value/Ebitda9.28

Forecast

1Y Price Target

$105.80

Price Target Upside2.43% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering11

Pegasystems Business Overview & Revenue Model

Company DescriptionPegasystems 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 MoneyPegasystems generates revenue primarily through the sale of software licenses, cloud-based services, and maintenance and support services. The company employs a subscription-based model for its software offerings, providing clients with both on-premise and cloud deployment options. Revenue streams include software license fees, which are typically recognized upfront, and recurring subscription fees for its cloud services. Additionally, Pegasystems offers professional services, such as consulting and training, to assist clients in implementing and optimizing their software solutions. Key partnerships with technology and consulting firms, such as Accenture and Capgemini, help expand its market reach and contribute to its earnings by facilitating more extensive deployment of its solutions among large enterprises.

Pegasystems Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Breaks down revenue from different business areas, highlighting which segments drive growth and profitability, and indicating strategic focus and market demand.

Chart InsightsPegasystems is experiencing robust growth in its Cloud segment, driven by strategic cloud transitions and AI initiatives, as highlighted by the Pega GenAI Blueprint's success. However, the Maintenance and Perpetual License segments are facing declines, reflecting a shift towards cloud solutions. Despite currency headwinds, the company projects strong ACV growth, supported by enhanced sales efforts and new client acquisitions. The focus on cloud and AI positions Pegasystems for sustained momentum, although flat cloud margins and potential declines in traditional segments pose challenges.

Data provided by:

Main Street Data

Pegasystems Financial Statement Overview

Summary

Pegasystems demonstrates strong revenue growth with improved profitability as evidenced by a net profit margin of 11.98% and efficient cash flow generation. The balance sheet is solid with low leverage, though asset shrinkage poses a potential risk. Overall, financial health is robust with commendable profitability and cash management.

Income Statement

Very Positive

Pegasystems demonstrates strong revenue growth with a 9.74% increase from the previous year and a healthy gross profit margin of 75.73% in TTM. The net profit margin has significantly improved to 11.98% from previous losses, indicating enhanced profitability. EBIT and EBITDA margins of 16.55% and 19.34% respectively, show strong operational efficiency.

Balance Sheet

Positive

The balance sheet shows a stable financial position with a debt-to-equity ratio of 0.11, indicating low leverage. The equity ratio is 46.23%, reflecting a strong equity base. Return on Equity (ROE) has improved to 32.17%, showcasing effective utilization of shareholders' equity. However, the decrease in total assets over the years may pose a potential risk.

Cash Flow

Positive

Operating cash flow to net income ratio is robust at 1.88, indicating strong cash generation relative to net income. Free cash flow has seen substantial growth, and the free cash flow to net income ratio is 1.85, highlighting efficient cash usage. However, fluctuations in investing and financing cash flows suggest potential volatility.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.64B	1.50B	1.43B	1.32B	1.21B	1.02B
	Gross Profit
1.24B	1.11B	1.05B	949.21M	875.29M	706.60M
	EBIT
271.92M	123.88M	80.95M	-87.66M	-94.73M	-143.53M
	EBITDA
321.22M	167.06M	121.06M	-119.28M	-94.73M	-67.94M
	Net Income Common Stockholders
196.74M	99.19M	67.81M	-345.58M	-63.04M	-61.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
371.74M	739.97M	423.34M	297.22M	362.78M	465.17M
	Total Assets
1.32B	1.77B	1.51B	1.36B	1.59B	1.60B
	Total Debt
79.27M	549.67M	581.27M	687.74M	678.54M	518.20M
	Net Debt
-151.86M	212.56M	351.37M	542.68M	518.58M	346.30M
	Total Liabilities
710.68M	1.18B	1.16B	1.23B	1.18B	1.06B
	Stockholders Equity
611.27M	585.48M	353.84M	130.84M	416.09M	542.17M
Cash Flow		Free Cash Flow
361.02M	338.21M	201.00M	-13.04M	28.66M	-25.93M
	Operating Cash Flow
370.01M	345.93M	217.78M	22.34M	39.12M	-563.00K
	Investing Cash Flow
191.72M	-202.58M	-50.75M	13.07M	72.50M	-321.68M
	Financing Cash Flow
-624.10M	-30.21M	-81.96M	-46.99M	-121.84M	423.45M

Pegasystems Technical Analysis

Technical Analysis Sentiment

Positive

Last Price103.29

Price Trends

50DMA

79.69

Positive

100DMA

86.79

Positive

200DMA

82.34

Positive

Market Momentum

MACD

5.99

Negative

RSI

78.28

Negative

STOCH

88.01

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Positive. The current price of 103.29 is above the 20-day moving average (MA) of 94.30, above the 50-day MA of 79.69, and above the 200-day MA of 82.34, indicating a bullish trend. The MACD of 5.99 indicates Negative momentum. The RSI at 78.28 is Negative, neither overbought nor oversold. The STOCH value of 88.01 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PEGA.

Pegasystems Risk Analysis

Pegasystems disclosed 34 risk factors in its most recent earnings report. Pegasystems reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Pegasystems Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PEGA	76 Outperform	$8.42B	48.12	39.29%	0.12%	14.29%	151.38%
CWAN	76 Outperform	$6.66B	14.12	58.14%	―	23.21%	―
CVLT	76 Outperform	$7.86B	106.40	25.23%	―	18.63%	-55.09%
QXO	73 Outperform	$9.08B	―	1.44%	―	0.22%	48.10%
BILL	69 Neutral	$4.78B	482.28	0.97%	―	14.52%	―
VERX	66 Neutral	$6.10B	235.54	-19.65%	―	15.20%	-666.94%
Sector *	60 Neutral	$11.59B	10.34	-7.15%	2.94%	7.49%	-10.88%

* Technology Sector Average

Performance Comparison

PEGA

Pegasystems

103.29

41.62

67.49%

CVLT

CommVault Systems

179.51

68.81

62.16%

QXO

QXO Inc

18.35

-89.48

-82.98%

BILL

Bill.com Holdings

46.71

-9.89

-17.47%

VERX

Vertex

38.74

6.05

18.51%

CWAN

Clearwater Analytics Holdings

23.66

4.62

24.26%

Pegasystems Earnings Call Summary

Earnings Call Date:Apr 22, 2025

(Q1-2025)

% Change Since: 50.22%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Positive

The earnings call highlighted a strong start to the fiscal year with significant growth in key metrics such as ACV and free cash flow. The success of Pega GenAI Blueprint and achieving a debt-free status were notable achievements. However, currency impacts and macro-economic uncertainties were areas of concern. Overall, the positive aspects and optimism for future growth outweigh the challenges, indicating a robust performance.

Q1-2025 Updates

Positive Updates

Strong Start in 2025

Annual Contract Value (ACV) increased by $74 million, marking a 13% year-over-year growth. Pega Cloud ACV grew by 23% to $700 million, showing strong cross-selling and upselling efforts.

Record Free Cash Flow

Achieved $202 million in free cash flow in Q1, significantly surpassing the total free cash flow of $201 million for the entire year of 2023.

Pega GenAI Blueprint Success

Pega GenAI Blueprint is now influencing every single piece of business, accelerating client engagement and showcasing Pega's platform capabilities effectively.

Debt-Free Status Achieved

Fully repaid remaining convertible note balances of $468 million, achieving debt-free status as an important milestone in the company's transformation journey.

Positive Reception to Innovations

Overwhelmingly positive response to innovations like Pega GenAI Blueprint, with more than 1,000 new Blueprints created every week, more than double from months ago.

Negative Updates

Currency Impact on Pega Cloud Revenue

Currency fluctuations impacted Pega Cloud revenue, creating noise in the revenue line items of the P&L.

Macro-Economic Uncertainty

Higher levels of uncertainty and anxiety in the macro-environment, especially in European countries.

Company Guidance

In the first quarter of fiscal year 2025, Pegasystems reported robust financial performance and strategic progress, with notable highlights including a substantial increase in annual contract value (ACV) by $74 million, reflecting a year-over-year growth of over 13%. The company also achieved a Pega Cloud ACV growth rate of 23%, reaching $700 million, demonstrating effective cross-selling and upselling strategies. Pegasystems generated $202 million in free cash flow, a significant leap from the previous year's figures, and repurchased approximately 1.5 million shares for $120 million, further strengthening its capital allocation strategy. Additionally, the company achieved a debt-free status after fully repaying $468 million in convertible notes, marking an important milestone in its transformation journey. Despite the macroeconomic uncertainties, Pegasystems remained confident in its strategic initiatives, particularly emphasizing the transformative role of Pega GenAI Blueprint in driving digital and legacy transformations for clients worldwide.

Pegasystems Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Pegasystems Completes Repayment of Convertible Notes

Positive

Mar 3, 2025

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.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.