Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.6%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PEGA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PEGA has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- PEGASYSTEMS INC's earnings per share declined by 24.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PEGASYSTEMS INC increased its bottom line by earning $0.49 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus $0.49).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has decreased by 23.8% when compared to the same quarter one year ago, dropping from $20.41 million to $15.56 million.
- Net operating cash flow has significantly decreased to -$2.73 million or 118.84% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Pegasystems Inc. develops, markets, licenses, and supports software to automate complex, changing business processes in the United States and internationally. Pegasystems has a market cap of $1.24 billion and is part of the technology sector and computer software & services industry. Shares are down 33.5% year to date as of the close of trading on Wednesday.
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