What happened
Business management software specialist Pegasystems (PEGA +1.62%) trounced the market last year, according to data provided by S&P Global Market Intelligence. The stock rose 31% in 2017, compared to a 19% increase for the S&P 500.
It was a volatile year for shareholders, though, with the stock rising by as much as 75% before ending the year with the more modest -- but still market-thumping -- 31% increase.
So what
The CRM software giant kicked the year off with a bang, as revenue spiked 25% in the first quarter due to surging demand for its cloud and maintenance offerings. The company couldn't keep that momentum going, though. Sales gains fell to a 5% pace in the second quarter and then flipped to a slight decline by the third quarter.
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Pegasystems' results were hurt by a faster transition toward subscription-based offerings than management had expected. That's a long-term positive for the business since these purchases drive recurring revenue and are more profitable. But the trend still pressures short term results as sales and earnings are stretched out over longer time periods.
Now what
Pegasystems also failed to close on a few major contracts during the year, and so investors should watch the next few quarterly reports for evidence that the misses were simply a matter of timing and not a reflection of lost business opportunities. Winning just a few of these new clients in the fiscal fourth quarter would ensure that the company reaches its original annual sales growth goal of 15% for fiscal 2017.
