Pegasystems Inc. (NASDAQ:PEGA), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let's take a look at Pegasystems's outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Pegasystems Still Cheap?
According to our valuation model, Pegasystems seems to be fairly priced at around 4.9% below our intrinsic value, which means if you buy Pegasystems today, you'd be paying a reasonable price for it. And if you believe that the stock is really worth $65.01, then there isn't much room for the share price grow beyond what it's currently trading. Although, there may be an opportunity to buy in the future. This is because Pegasystems's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Pegasystems?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Pegasystems, it is expected to deliver a highly negative earnings growth in the next few years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, PEGA appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on PEGA for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there's less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help crystalize your views on PEGA should the price fluctuate below its true value.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 5 warning signs for Pegasystems (1 shouldn't be ignored) you should be familiar with.
If you are no longer interested in Pegasystems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.