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 ( TheStreet) -- Pegasystems (Nasdaq: PEGA) has been upgraded by TheStreet Ratings from hold to buy. 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, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- PEGA's revenue growth has slightly outpaced the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 11.7%. 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 1.84, which demonstrates the ability of the company to cover short-term liquidity needs.
- PEGASYSTEMS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PEGASYSTEMS INC increased its bottom line by earning $0.56 versus $0.26 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.56).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Software industry average. The net income increased by 307.4% when compared to the same quarter one year prior, rising from -$2.27 million to $4.70 million.
- The gross profit margin for PEGASYSTEMS INC is currently very high, coming in at 70.66%. 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 4.00% significantly trails the industry average.