Pegasystems Inc (NASDAQ: PEGA)

Sector: Technology Industry: Software - Application CIK: 0001013857
Market Cap 9.94 Bn
P/B 16.66
P/E 35.77
P/S 5.74
ROIC (Qtr) 80.51
Div Yield % 0.21
Rev 1y % (Qtr) 17.32
Total Debt (Qtr) 62.40 Mn
Debt/Equity (Qtr) 0.10

About

Pegasystems Inc., commonly known as Pega, operates in the business process management (BPM) software industry with the ticker symbol PEGA. The company's main business activities involve providing organizations with software solutions that enable them to automate and optimize their business processes. Pega's software solutions cater to a diverse range of industries, such as healthcare, finance, and government, in various countries and regions. Pega generates revenue primarily through the sale of its software products and services. The company's...

Read more

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 442.02M provides robust 7.08x coverage of total debt 62.40M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 442.02M provides exceptional 149.33x coverage of interest expenses 2.96M, showing strong debt service capability.
  • Strong tangible asset base of 1.21B provides 19.41x coverage of total debt 62.40M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 430.75M exceeds capital expenditure of 11.28M by 38.20x, indicating strong organic growth funding capability.
  • Operating cash flow of 442.02M provides solid 0.74x coverage of current liabilities 597.45M, showing strong operational health.

Bear case

  • Operating cash flow of 442.02M provides thin coverage of dividend payments of (12.88M) with a -34.32 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of 228.32M provide weak support for R&D spending of 308.20M, which is 0.74x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 442.02M provides insufficient coverage of deferred revenue obligations of 404.76M, which is 1.09x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 442.02M shows concerning coverage of stock compensation expenses of 155.70M, with a 2.84 ratio indicating potential earnings quality issues.
  • Free cash flow of 430.75M represents just -0.86x of debt issuance (501.75M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Geographical Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 288.31 Bn 34.60 6.72 10.73 Bn
2 CRM Salesforce, Inc. 248.32 Bn 34.38 6.16 11.14 Bn
3 SHOP Shopify Inc. 212.27 Bn 119.19 19.85 1.12 Bn
4 INTU Intuit Inc. 180.73 Bn 43.89 9.30 6.78 Bn
5 UBER Uber Technologies, Inc 178.38 Bn 10.72 3.60 12.19 Bn
6 NOW ServiceNow, Inc. 146.98 Bn 84.91 11.60 2.40 Bn
7 ADBE Adobe Inc. 144.48 Bn 20.77 6.23 6.64 Bn
8 ADP Automatic Data Processing Inc 108.20 Bn 26.16 5.18 9.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 7.58 2.65
EV to Cash from Ops. EV/CFO 22.18 13.37
EV to Debt EV to Debt 157.12 57.69
EV to EBIT EV/EBIT 29.46 19.12
EV to EBITDA EV/EBITDA 28.65 15.00
EV to Free Cash Flow [EV/FCF] EV/FCF 22.76 14.69
EV to Market Cap EV to Market Cap 0.99 -92.28
EV to Revenue EV/Rev 5.66 4.60
Price to Book Value [P/B] P/B 16.66 4.26
Price to Earnings [P/E] P/E 35.77 -136.90
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 21.58 -3.95
Dividend Payout Ratio % Div Payout % (Qtr) 4.60 4.25
Dividend per Basic Share Div per Share (Qtr) 0.09 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 3.56 2.52
Interest Coverage Int. cover (Qtr) 112.43 -52.32
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -51.74 -259.78
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -48.31 9,763.58
Dividend Growth (1y) % Div 1y % (Qtr) 50.00 1.61
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 118.25 -263.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 86.35 56.46
EBIT Growth (1y) % EBIT 1y % (Qtr) 121.76 -225.15
EBT Growth (1y) % EBT 1y % (Qtr) 130.05 -86.10
EPS Growth (1y) % EPS 1y % (Qtr) 116.00 123.84
FCF Growth (1y) % FCF 1y % (Qtr) 33.30 -36.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 19.10 95.08
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.34 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.03 0.02
Cash Ratio Cash Ratio (Qtr) 0.25 3.75
Current Ratio Curr Ratio (Qtr) 1.36 8.16
Debt to Equity Ratio Debt/Equity (Qtr) 0.10 0.17
Interest Cover Ratio Int Coverage (Qtr) 112.43 -52.32
Times Interest Earned Times Interest Earned (Qtr) 112.43 -52.32
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 21.60 -100.06
EBIT Margin % EBIT Margin % (Qtr) 19.21 -164.24
EBT Margin % EBT Margin % (Qtr) 19.04 -116.94
Gross Margin % Gross Margin % (Qtr) 75.70 58.20
Net Profit Margin % Net Margin % (Qtr) 16.00 -121.65