Pegasystems Inc (PEGA) stock analysis

P/E below its 5-year median

Pegasystems's P/E of 19.9 is below its own 5-year median of 50.1.

P/E below the industry

Pegasystems's P/E of 19.9 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 27.3.

EV/EBITDA below its 5-year median

Pegasystems's EV/EBITDA of 26.4 is below its 5-year median of 32.8.

P/B above the industry

Pegasystems's price-to-book of 9.55 is above the Computer Programming, Data Processing, and Other Computer Related Services median of 3.20.

Trading below fair value

The share price of $32.04 is below our fair value estimate of $42.69.

Margin of safety over 20%

The price is 25.0% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 9.8% a year over the last three fiscal years, short of the 10% we look for.

EPS growth over 3 years

Needs positive EPS three years ago and today.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing slower than the industry

Revenue grew 0.9% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 9.6%.

Guidance issued

The latest outlook (2026 Revenue, Feb 10, 2026) was issued for the first time, so it neither adds nor takes away points.

Gross margin improving

Gross margin was 75.9% over the last twelve months, against 75.7% a year earlier.

Return on equity under 15%

Return on equity was 51.4% over the last twelve months and averaged -6.6% over five years; we look for 15% on both.

Return on capital over 10%

Return on invested capital was 71.4%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Pegasystems's return on equity of 51.4% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -1.1%.

Earnings over 5 years

Needs positive net income five years ago and in the latest year.

Net margin above its 5-year average

Net margin was 16.9% over the last twelve months, against a 5-year average of 0.5%.

Net margin above the industry

Pegasystems's net margin of 16.9% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.7%.

No debt

Pegasystems has no borrowings on its latest balance sheet.

Debt not rising

With no debt today, leverage cannot have risen.

Debt covered by cash flow

There is no debt to cover.

Interest well covered

Operating income covers interest expense 650.4 times.

Short-term assets cover short-term debts

Current assets are 1.04 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 6.33; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Pegasystems paid dividends worth 0.4% of the share price over the last twelve months.

Yield below Treasuries

The 0.4% yield is below the 4.6% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.9% or more; Pegasystems yields 0.4%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 6.9% of net income.

Covered by free cash flow

Dividends take 4.6% of free cash flow.