Pegasystems (PEGA) Is Today's Strong And Under The Radar Stock

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.

Trade-Ideas LLC identified Pegasystems ( PEGA) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Pegasystems as such a stock due to the following factors:

  • PEGA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.6 million.
  • PEGA is making at least a new 3-day high.
  • PEGA has a PE ratio of 56.
  • PEGA is mentioned 0.87 times per day on StockTwits.
  • PEGA has not yet been mentioned on StockTwits today.
  • PEGA is currently in the upper 20% of its 1-year range.
  • PEGA is in the upper 35% of its 20-day range.
  • PEGA is in the upper 45% of its 5-day range.
  • PEGA is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on PEGA:

Pegasystems Inc. develops, markets, licenses, and supports software to automate complex and changing business processes in the United States and internationally. The stock currently has a dividend yield of 0.6%. PEGA has a PE ratio of 56. Currently there is 1 analyst that rates Pegasystems a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Pegasystems has been 189,500 shares per day over the past 30 days. Pegasystems has a market cap of $1.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.64 and a short float of 2% with 3.37 days to cover. Shares are up 5.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pegasystems as a 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, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 9.6%. 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 1.57, which demonstrates the ability of the company to cover short-term liquidity needs.
  • PEGASYSTEMS INC's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PEGASYSTEMS INC reported lower earnings of $0.41 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.41).
  • The gross profit margin for PEGASYSTEMS INC is rather high; currently it is at 69.92%. Regardless of PEGA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGA's net profit margin of 3.85% is significantly lower than the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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