Value
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.9 |
| P/S | 8.2 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 8.8 |
| PEG | 3.7 |
| Analyst target | 6.0 |
- ▸Forward P/E: 12.5x
- ▸PEG: 2.99
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 score5.3/10
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. | ↓Deteriorating |
| 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%. | ↓Deteriorating |
| 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.
↓DeterioratingSentiment 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.
↓DeterioratingMomentum 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
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 6.0 |
| Gross margin | 10.0 |
| Op margin | 1.8 |
| Net margin | 9.3 |
| Current ratio | 4.2 |
| FCF quality | 10.0 |
| Moat | 8.4 |
| Rule of 40 | 5.5 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 55%
- ▸Strong margins: 19%
- ▸Excellent cash conversion: 157% FCF/NI
- ▸Wide economic moat
Growth
2.4/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.8 |
| EPS growth | 0.0 |
Momentum
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 1.8 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Overbought bear rally (RSI 89)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -8.3%/30d — confirmed downtrend
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.6 |
| erm sentiment | 2.0 |
- ▸Analyst upside: 30%
- ▸Estimates falling as sentiment proxy (-7.5%)
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Negligible insider selling — $229,616 (0.004% of mkt cap)
- ▸Institutions accumulating
Peer rank
6.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.6 |
| quality rank | 8.2 |
| growth rank | 3.1 |
- ▸Superior ROE vs peers
Technical
1.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.2 |
| support resistance | 0.7 |
| 52w position | 0.0 |
Risk (lower is worse)
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.0 |
| days to cover | 3.7 |
| volatility | 1.8 |
| put call | 6.7 |
| implied vol | 1.5 |
| max pain risk | 3.0 |
| beta | 7.8 |
| debt equity | 9.5 |
- ▸Short squeeze setup: 18% short, quality 7.5
- ▸High IV: 71%
- ▸Above max pain $15
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 1.5 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 2.6 |
| dividend safety | 8.5 |
- ▸Estimates down -7.5% (30d)
- ▸Earnings concerns: 2B/2M
- ▸Dividend aristocrat: 0.4% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.6>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:70d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.9<1.5@spot
Warning (1)
- DEATH_CROSS:momentum=5.6>=5.0 recovering
Reward-to-Risk
0.87
Upside
+13.0%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 89
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Drawdown -51% (>40% off 52w high)
Investment implication
The F-path SELL output reflects an overall score of 5.3 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 7.3) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.9<1.5@spot) reinforce the read. Current asymmetry R:R is 0.87 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 7.3, Insider at 7.3, and Peer rank at 6.0; the weakest are Technical at 1.0, Growth at 2.4, and Catalyst at 4.2. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.87 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Returns Capital
Trip ifROE falls below 30% for 2 consecutive reported quarters, signaling deterioration in capital efficiency.
- P2Revenue Decline Risk
Trip ifRevenue declines by more than 15% year-over-year for 2 consecutive quarters, extending the current 10% decline trend.
- P3Analyst Upside Valuation
Trip ifAnalyst consensus target falls below $40, reducing projected upside to less than 25% from current levels.
- P4Death Cross Downtrend
Trip ifShort interest rises above 20%, indicating further deterioration in institutional sentiment beyond the current 14% level.