Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- Pegasystems (Nasdaq: PEGA) has been upgraded by TheStreet Ratings from sell 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 impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.
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- The revenue growth came in higher than the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 24.8%. Growth in the company's revenue appears to have helped boost the 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 1.70, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PEGASYSTEMS INC is currently very high, coming in at 75.80%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PEGA's net profit margin of 14.18% significantly trails the industry average.
- Net operating cash flow has decreased to $14.50 million or 28.12% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PEGASYSTEMS INC has marginally lower results.
- PEGA has underperformed the S&P 500 Index, declining 12.50% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
-- Written by a member of TheStreet Ratings Staff