Last update on 2024-06-07

Pegasystems (PEGA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Piotroski F-Score analysis of Pegasystems (PEGA) for 2023, achieving a score of 8/9. Explore profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 8

We're running Pegasystems (PEGA) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The analysis uses the Piotroski F-Score model to evaluate Pegasystems' (PEGA) financial health based on nine criteria related to profitability, liquidity, and operational efficiency. Pegasystems scored 8 out of 9, indicating strong financial health. The company demonstrated positive net income in 2023, a significant improvement from previous losses, strong cash flow from operations, and improved return on assets. Additionally, it exhibited higher operating cash flow than net income, reduced leverage, and a higher current ratio, reflecting better short-term financial stability. However, an increase in outstanding shares could lead to shareholder dilution. Overall, Pegasystems shows improved profitability and operational efficiency.

Insights for Value Investors Seeking Stable Income

Considering Pegasystems' high Piotroski F-Score of 8, which signifies strong financial health, it appears to be a promising stock to look into. The recent improvements in profitability, cash flow, and leverage suggest that the company is managing well. However, potential investors should be aware of the slight dilution in shares. Overall, Pegasystems seems to be a strong candidate for further research and potentially a good investment opportunity.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Pegasystems (PEGA)

Company has a positive net income?

The Piotroski F-Score assigns 1 point if a company's net income is positive, signaling profitability, otherwise it assigns 0 points.

In 2023, Pegasystems reported a net income of $67,808,000. This is a significant recovery from previous years, particularly compared to their substantial losses in 2022, which stood at $345,582,000. The positive net income for 2023 thus earns Pegasystems 1 point in the Piotroski F-Score framework. A historical view over the past 20 years shows fluctuating profitability. The recent positive figure is a turnaround given the losses reported in 2019, 2020, 2021, and 2022. This trend suggests improving operational effectiveness and could indicate robust financial health moving forward, marking a positive indication for investors skillfully managing through turbulent times.

Company has a positive cash flow?

CFO indicates the cash a company generates from its regular business operations. It reflects a firm's ability to generate sufficient cash flow to maintain and grow operations, pay dividends, and reduce debt.

In 2023, Pegasystems (PEGA) reported a Cash Flow from Operations (CFO) of $217,785,000, which is indeed positive. Historically, this figure has shown significant fluctuation over the last 20 years, with peaks and troughs. The largest swing was from a negative $42,165,000 in 2019 to a positive $217,785,000 in 2023. This trend is significantly positive, indicating a strong rebound in operational cash flow and suggesting that Pegasystems has improved its efficiency and operational profitability. Therefore, this criterion earns a point, reflecting well on the company's financial health under the Piotroski analysis.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion examines the year-over-year improvement in returns generated from assets. An increase is viewed positively as it indicates enhanced profitability and efficient asset usage.

In 2023, Pegasystems (PEGA) reported an ROA of 0.0473, a significant improvement from the -0.2342 ROA in 2022. This positive change signifies a remarkable turnaround in asset utilization and profitability. Evaluating an ROA shift from negative to positive, Pegasystems adds 1 point for meeting this criterion. Historically, the company had varied ROA, but the significant boost to positive territory marks a strong signal of operational improvement.

Operating Cashflow are higher than Netincome?

The Operating Cash Flow metric indicates the cash a company generates from its normal business operations. It is crucial as it reflects the company’s efficiency in generating cash from its core activities, independent of non-operational factors.

In 2023, Pegasystems' Operating Cash Flow stands at $217,785,000, whereas its Net Income is $67,808,000. The Operating Cash Flow being higher than the Net Income is a positive indicator; it suggests that the company is highly efficient at converting its revenues into cash, underlying a solid operational performance. Historically, Pegasystems has shown variability in this metric, with significant improvements observed recently. Calculated from the last 20 years' dataset, 14 years have their Operating Cash Flow surpassing their Net Income, which reaffirms the current trend's positive standing. Hence, for 2023, Pegasystems earns 1 point in this criterion.

Liquidity of Pegasystems (PEGA)

Leverage is declining?

Change in Leverage measures a company's reliance on debt for its operations. A decrease suggests improved financial stability, making this criterion vital for evaluating a firm's financial health.

For Pegasystems (PEGA), the leverage ratio moved from 0.4955 in 2022 to 0.3748 in 2023. This means that the company's leverage decreased. As a result, this criterion scores 1 point, reflecting a positive trend in reducing debt reliance. Historical data further substantiates this point as it reveals fluctuating, but recently improving, leverage ratios.

Current Ratio is growing?

The Current Ratio indicates a company's ability to pay short-term obligations with its short-term assets.

Pegasystems (PEGA) displayed a rise in its Current Ratio from 1.5706 in 2022 to 1.7832 in 2023, reflecting an enhanced ability to cover short-term liabilities with short-term assets. This upward trend adds 1 point in the Piotroski analysis, as an increasing Current Ratio is deemed favorable, showing improved liquidity. Compared with the industry median's relatively stable Current Ratio, Pegasystems’ improvement signifies a more robust short-term financial position.

Number of shares not diluted?

Share count is significant as it impacts earnings per share and ownership dilution. Higher share count often indicates dilution.

In comparing the Outstanding Shares of Pegasystems (PEGA) between 2022 (81,947,000 shares) and 2023 (83,162,000 shares), we observe an increase of 1,215,000 shares (approximately 1.48% increase). According to the Piotroski F-score system, an increase in shares outstanding typically scores 0 as it suggests potential dilution of existing shareholder value. This negative trend is confirmed when looking at the last 20 years, where several yearly increases are seen, indicating recurring dilution concerns.

Operating of Pegasystems (PEGA)

Cross Margin is growing?

The change in Gross Margin is a metric used in Piotroski's F-Score to determine the company's operational efficiency and cost management. An increase typically indicates better cost control and pricing power.

Examining Pegasystems' Gross Margin, we see an improvement from 0.7203 in 2022 to 0.7358 in 2023, resulting in a positive shift. As per Piotroski's F-Score, this improvement grants Pegasystems 1 point. Historically, Pegasystems has outpaced the industry's median Gross Margin performance consistently, with recent years solidifying this trend. The Gross Margin reaching 0.7358 indicates robust control over production costs and improved pricing strategies, beneficial for shareholder value. This positive trend suggests enhanced operational efficiencies, as evidenced by a decade-long Gross Margin generally above 0.65, versus the industry median oscillating near 0.64 to 0.67.

Asset Turnover Ratio is growing?

Asset turnover measures a firm's efficiency in using its assets to generate sales; an increase signifies more efficient usage.

Pegasystems (PEGA) has displayed an improvement in asset turnover, rising from 0.8931 in 2022 to 0.9989 in 2023. This increase, represented by a 1-point gain, suggests a notable enhancement in the company's efficiency at utilizing its assets to generate revenue. Historical data over the last 20 years reveals fluctuating asset turnover ratios, with the current rise reversing a downward trend observed from 2016-2021. The consistency over these two years also indicates favorable management and operational strategies at PEGA.