One-glance verdict
Undervalued
$129.19 our estimate vs market $31.09
Wall Street consensus: $58.18 (-55.0% lower than our fair-value estimate)
76% below our estimate, below the bear case
Fundamentals snapshot
Pegasystems Inc.
PEGA · NMS · Technology · Software - Application
Current price
$31.09
52-week range
$28.66 - $68.10
Market cap
$5.20B
Balance sheet
Healthy
221.32x Strong cushion
Net cash $401.83M. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
0 Risks
3 rewards · 0 risks
- Reward Returns 51.7% on equity, ahead of 80% of its peers.
- Reward Free cash flow was positive in 7/10 years.
- Reward Trades at 16.8x P/E vs peer median 35.8x (53.0% cheaper).
What this company does
Pegasystems Inc.
Pegasystems provides software that helps big businesses automate their operations and improve how they interact with customers, using artificial intelligence to guide decisions. Most of its sales come from cloud-based subscriptions, which provides the company with a steady stream of recurring revenue (income that's expected to continue reliably over time). This business model is important because it makes future sales more predictable than one-time purchases.
How the company got here
Pegasystems was started in 1983 by Alan Trefler, who used his experience as a chess programmer to create software that could help businesses manage complex processes and rules. The company initially focused on case management for large clients like American Express and went public in 1996, trading on the NASDAQ under the symbol PEGA. A key turning point was the 2010 acquisition of Chordiant, which expanded its capabilities into customer relationship management (CRM) and opened up new industries like healthcare and telecommunications. More recently, the company has shifted its business model from selling one-time software licenses to a subscription-based service, creating a more predictable stream of revenue (money a company receives from its business activities).
What it actually does
Pegasystems provides a software platform that helps large companies automate their operations and improve how they interact with customers. Think of it as a toolkit that lets businesses build applications without needing to write a lot of complex code; this is often called a 'low-code' platform. These applications can do things like streamline a loan application process at a bank, manage patient care in a hospital, or automate how an insurance company handles claims. The software uses artificial intelligence (AI) to help companies make smarter decisions, like predicting what a customer might need next or identifying the best way to resolve a service issue.
Pega Cloud
This is the company's cloud-based subscription service, where customers pay a recurring fee to access Pega's software hosted on the internet. Instead of installing and managing the software on their own servers, clients use Pega's cloud infrastructure, which is primarily run on Amazon Web Services (AWS). This segment has become the company's largest and fastest-growing source of revenue, now representing nearly half of the company's total income. Customers in this segment are typically large enterprises looking to modernize their systems and avoid the complexity of managing their own IT infrastructure.
Subscription License
This segment involves customers who still choose to run Pega's software on their own computers or in their own data centers, rather than using the Pega Cloud. They pay a recurring subscription fee for the right to use the software over a specific term. This model provides a steady income stream for Pegasystems, similar to the cloud offering. While the company is encouraging customers to move to the cloud, this remains a significant part of the business for clients who have specific security or operational needs that require them to manage the software themselves.
Maintenance
This revenue comes from customers who have previously purchased a perpetual license (a one-time purchase to use the software indefinitely) and pay an ongoing fee for support and updates. This ensures they have access to the latest features, bug fixes, and technical assistance from Pegasystems. While the company has moved away from selling new perpetual licenses, this segment still generates consistent revenue from its long-standing customers.
Consulting
Pegasystems offers professional services to help its clients implement and get the most out of its software. This can include helping to design new automated workflows, migrating old systems to the Pega platform, and providing training for the client's employees. While this is the smallest portion of their revenue, it plays an important role in ensuring customers are successful with the software, which helps build long-term relationships. The company is increasingly working with partners to deliver these services.
What management is betting on now
Management is heavily focused on artificial intelligence (AI) and cloud-based services. They are particularly promoting a new tool called Pega GenAI Blueprint, which uses AI to help companies quickly design and build new applications, significantly speeding up the process of modernizing outdated systems. The company is also making a big push to move more of its customers to its Pega Cloud subscription service, which provides more predictable revenue. A key part of this strategy is a collaboration with Amazon Web Services (AWS) to make it easier for large enterprises to transition their old systems to Pega's modern cloud platform.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q2
$38.84M
FY2024 Q3
$27.39M
FY2024 Q4
$92.44M
FY2025 Q1
$202.35M
FY2025 Q2
$84.13M
FY2025 Q3
$51.83M
FY2025 Q4
$152.41M
FY2026 Q1
$206.53M
Revenue
$429.97M
Net income
$32.76M
Diluted EPS
0.18
Operating cash flow
$212.25M
Free cash flow
$206.53M
Fetching…
Sources
Revenue
$504.32M
Net income
$234.57M
Diluted EPS
0.81
Operating cash flow
$158.43M
Free cash flow
$152.41M
Fetching…
Sources
Revenue
$381.35M
Net income
$43.36M
Diluted EPS
0.24
Operating cash flow
$56.30M
Free cash flow
$51.83M
Fetching…
Sources
Revenue
$384.51M
Net income
$30.08M
Diluted EPS
0.17
Operating cash flow
$86.27M
Free cash flow
$84.13M
Fetching…
Sources
Revenue
$475.63M
Net income
$85.42M
Diluted EPS
0.91
Operating cash flow
$204.23M
Free cash flow
$202.35M
Fetching…
Sources
Revenue
$490.83M
Net income
$119.09M
Diluted EPS
1.35
Operating cash flow
$95.23M
Free cash flow
$92.44M
Fetching…
Sources
Revenue
$325.05M
Net income
$-14.39M
Diluted EPS
-0.17
Operating cash flow
$30.45M
Free cash flow
$27.39M
Fetching…
Sources
Revenue
$351.15M
Net income
$6.61M
Diluted EPS
0.07
Operating cash flow
$40.10M
Free cash flow
$38.84M
Fetching…
Sources
Is it cheap or expensive?
Fair value $129.19 vs current price $31.09
Wall Street consensus is the average analyst price target: $58.18 (-55.0% lower than our fair-value estimate).
Our most-likely fair value is $129.19 a share — about 315.5% above today's price of $31.09, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net cash $401.8M - more cash than debt. Interest coverage 221.3x.
Net debt
$-401.83M
Interest coverage
221.32x
Pegasystems Inc.'s profit covers its interest bill about 221.3 times over. which is stronger than every peer shown here and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
PEGA
BASELINE
Pegasystems Inc.
Total debt $72.13M Interest coverage 221.32x This is the baseline the peer rows are being compared against.
Total debt $295.21M Interest coverage 0.03x -100% vs PEGA Carries about 7577.0x less debt cushion than PEGA.
Total debt $449.59M Interest coverage 10.50x -95% vs PEGA Carries about 21.1x less debt cushion than PEGA.
Total debt $704.24M Interest coverage 3.11x -99% vs PEGA Carries about 71.2x less debt cushion than PEGA.
Total debt $800.31M Interest coverage 2.05x -99% vs PEGA Carries about 108.0x less debt cushion than PEGA.
What you should know
The case for and against PEGA
3 Rewards
0 Risks
Rewards
-
Returns 51.7% on equity, ahead of 80% of its peers.
-
Free cash flow was positive in 7/10 years.
-
Trades at 16.8x P/E vs peer median 35.8x (53.0% cheaper).
Risks
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
16.81x
Forward P/E
10.22x
P/B
7.43x
P/S
3.06x
EV/EBITDA
23.14x
PEG ratio
3.44x
Profitability
How much profit each dollar creates
Gross margin
75.0%
Operating margin
8.6%
Net margin
20.0%
ROE
51.7%
ROA
8.5%
Health
Liquidity and balance-sheet strength
Debt / equity
0.10x
Current ratio
1.22x
Quick ratio
1.14x
Total debt
$72.13M
Total cash
$473.95M
Growth
How the business has been compounding
Revenue TTM
$1.70B
Revenue 5Y CAGR
9.6%
EPS TTM
1.85
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$513.25M
Free CF TTM
$490.72M
FCF margin
28.9%
Dividend
Shareholder payout
Yield
0.4%
Payout ratio
8.1%
Last ex-div date
2026-07-01