Taking the occasional loss is an integral part of investing in the stock market. And there’s no doubt that Pegasystems Inc. (NASDAQ:PEGA) The stock has had a very bad year. The stock price fell 65% during this period. To make matters worse, the three-year returns were also very disappointing (the share price is 38% lower than three years ago). Shareholders have had an even tougher race lately, with the share price falling 31% in the past 90 days.
On a more encouraging note, the company added $142 million to its market capitalization in the last 7 days alone, so let’s see if we can work out what caused shareholders to lose a year.
See our latest analysis for Pegasystems
Pegasystems is currently unprofitable, so most analysts would look to revenue growth to get a sense of how fast the underlying business is growing. Shareholders of unprofitable companies generally expect strong revenue growth. As you can imagine, rapid revenue growth, when sustained, often results in rapid profit growth.
Over the last twelve months, Pegasystems has increased its turnover by 20%. We think that’s a nice growth. Unfortunately, it seems investors wanted more, as the stock price fell 65% during this time. It may be that the company remains roughly on track, but its revenue growth has simply been delayed. In our opinion, it is not enough to look only at income, in any case. Always consider when profits will flow.
The company’s revenues and profits (over time) are shown in the image below (click to see exact figures).
Pegasystems is well known to investors and many smart analysts have attempted to predict future profit levels. You can see what analysts are predicting for Pegasystems in this interactive graph of future profit estimates.
A different perspective
We regret to report that Pegasystems shareholders are down 65% for the year (even including dividends). Unfortunately, this is worse than the general market decline of 15%. However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the 4% annualized loss over the past half-decade. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors must first make sure they are buying a high quality company. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Example: we have identified 1 warning sign for Pegasystems you should be aware.
Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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