Value
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.7 |
| P/S | 8.3 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 9.3 |
| PEG | 3.5 |
| Analyst target | 9.0 |
- ▸Forward P/E: 9.8x
- ▸PEG: 3.37
PEGA · Why this verdict
Why Pegasystems (PEGA) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Pegasystems combines a 52% ROE, 156% free cash flow conversion, and analyst upside of 55% with a forward P/E of 10.8x, but revenue is declining 10% year-over-year and the stock is in a confirmed downtrend with a death cross and short interest at 14%, creating a high-quality-but-falling-knife setup.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue is declining 10% year-over-year, resulting in a growth score of nearly 0 and signaling that the business is losing top-line momentum at a time when enterprise software peers are growing. Growth breakdown | Revenue growth returns to positive territory above 5% year-over-year within the next 2 fiscal years as the subscription transition cycle completes. | →Stable |
| CounterEnterprise software companies transitioning from perpetual licenses to subscription models often show temporary revenue decline during the transition; recurring revenue growth can accelerate after the shift completes. | ||
Pegasystems generates a 52% return on equity and converts net income to free cash flow at 156%, reflecting exceptional capital efficiency and earnings quality in its enterprise software business. Quality breakdown | ROE remains above 40% and free cash flow conversion stays above 120% over the next 4 fiscal quarters. | →Stable |
| CounterHigh ROE driven by leverage rather than asset efficiency can be misleading; the Rule of 40 score of 22 fails the threshold, and negative revenue growth undermines the sustainability of current returns. | ||
Analysts project 55% upside to a consensus target of $50.62 on a current price of $32.72, and the forward P/E of 10.8x is low relative to software peers, suggesting the market is discounting both quality and recovery potential. Sentiment breakdown | The stock price rises above $44 within 12 months as revenue trends stabilize and the analyst consensus target is partially closed. | →Stable |
| CounterAnalyst upside targets in declining-revenue software companies often get revised down rather than the stock catching up; the 55% gap may reflect estimates that will be cut as the revenue decline extends. | ||
With a death cross in place, the stock trading below all moving averages on a -5.7% 30-day slope, and 14% short interest, the price momentum is deeply negative and the technical setup favors further near-term weakness. Momentum breakdown | The momentum score rises above 4.5 within 12 months as price reclaims the 200-day moving average and short interest declines below 10%. | →Stable |
| Counter14% short interest provides significant fuel for a short squeeze if any positive catalyst emerges; high short interest combined with an asymmetric upside case can accelerate a recovery beyond what fundamentals alone would suggest. | ||
Revenue is declining 10% year-over-year, resulting in a growth score of nearly 0 and signaling that the business is losing top-line momentum at a time when enterprise software peers are growing.
→StableGrowth breakdown
- Expectation
- Revenue growth returns to positive territory above 5% year-over-year within the next 2 fiscal years as the subscription transition cycle completes.
CounterEnterprise software companies transitioning from perpetual licenses to subscription models often show temporary revenue decline during the transition; recurring revenue growth can accelerate after the shift completes.
Pegasystems generates a 52% return on equity and converts net income to free cash flow at 156%, reflecting exceptional capital efficiency and earnings quality in its enterprise software business.
→StableQuality breakdown
- Expectation
- ROE remains above 40% and free cash flow conversion stays above 120% over the next 4 fiscal quarters.
CounterHigh ROE driven by leverage rather than asset efficiency can be misleading; the Rule of 40 score of 22 fails the threshold, and negative revenue growth undermines the sustainability of current returns.
Analysts project 55% upside to a consensus target of $50.62 on a current price of $32.72, and the forward P/E of 10.8x is low relative to software peers, suggesting the market is discounting both quality and recovery potential.
→StableSentiment breakdown
- Expectation
- The stock price rises above $44 within 12 months as revenue trends stabilize and the analyst consensus target is partially closed.
CounterAnalyst upside targets in declining-revenue software companies often get revised down rather than the stock catching up; the 55% gap may reflect estimates that will be cut as the revenue decline extends.
With a death cross in place, the stock trading below all moving averages on a -5.7% 30-day slope, and 14% short interest, the price momentum is deeply negative and the technical setup favors further near-term weakness.
→StableMomentum breakdown
- Expectation
- The momentum score rises above 4.5 within 12 months as price reclaims the 200-day moving average and short interest declines below 10%.
Counter14% short interest provides significant fuel for a short squeeze if any positive catalyst emerges; high short interest combined with an asymmetric upside case can accelerate a recovery beyond what fundamentals alone would suggest.
Per-dimension breakdown
Quality
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 5.6 |
| Gross margin | 10.0 |
| Op margin | 3.4 |
| Net margin | 10.0 |
| Current ratio | 4.6 |
| FCF quality | 10.0 |
| Moat | 7.2 |
| Rule of 40 | 3.0 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 52%
- ▸Strong margins: 20%
- ▸Excellent cash conversion: 156% FCF/NI
- ▸Rule of 40: 22 (fail)
Growth
0.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.1 |
| EPS growth | 0.0 |
- ▸Declining revenue: -10%
Momentum
1.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 4.1 |
- ▸Capitulation risk (RSI 16, below 200MA)
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -6.1%/30d — confirmed downtrend
Sentiment
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 8.3 |
| Price target | 10.0 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 94%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $554,111 (0.011% of mkt cap)
Peer rank
3.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.6 |
| quality rank | 8.4 |
| growth rank | 0.0 |
- ▸Superior ROE vs peers
Technical
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.4 |
| support resistance | 8.7 |
| 52w position | 0.0 |
Risk (lower is worse)
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 2.9 |
| days to cover | 3.6 |
| volatility | 0.1 |
| put call | 0.0 |
| implied vol | 2.3 |
| max pain risk | 7.0 |
| beta | 7.9 |
| debt equity | 9.6 |
- ▸Elevated put/call: 4.00
- ▸High IV: 66%
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 7.3 |
| dividend safety | 7.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 40.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- ASYMMETRY:7.0>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:27d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:1.8<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
6.97
Upside
+69.2%
Downside
9.9%
Sizing output
AVOID
SetupFALLING_KNIFE — Death cross, below all MAs, RSI 16, MACD bearish
EdgeCATALYST — Earnings in 27d with 3/4 beat streak
SuitabilityAGGRESSIVE — MCap $5.0B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Sentiment at 7.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:1.8<4.5, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 6.97 — supplementary context, not the trigger for this path.
The strongest dimensions are Sentiment at 7.9, Quality at 7.0, and Value at 6.5; the weakest are Growth at 0.1, Momentum at 1.8, and Peer rank at 3.7. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 6.97 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Pegasystems generates a 52% return on equity and converts net income to free cash flow at 156%, reflecting exceptional capital efficiency and earnings quality in its enterprise software business.
Trip ifROE falls below 30% for 2 consecutive reported quarters, signaling deterioration in capital efficiency.
- P2Revenue is declining 10% year-over-year, resulting in a growth score of nearly 0 and signaling that the business is losing top-line momentum at a time when enterprise software peers are growing.
Trip ifRevenue declines by more than 15% year-over-year for 2 consecutive quarters, extending the current 10% decline trend.
- P3Analysts project 55% upside to a consensus target of $50.62 on a current price of $32.72, and the forward P/E of 10.8x is low relative to software peers, suggesting the market is discounting both quality and recovery potential.
Trip ifAnalyst consensus target falls below $40, reducing projected upside to less than 25% from current levels.
- P4With a death cross in place, the stock trading below all moving averages on a -5.7% 30-day slope, and 14% short interest, the price momentum is deeply negative and the technical setup favors further near-term weakness.
Trip ifShort interest rises above 20%, indicating further deterioration in institutional sentiment beyond the current 14% level.