Please ensure Javascript is enabled for purposes of website accessibility

Why Pegasystems Stock Lost 15% in October

By Demitri Kalogeropoulos - Nov 9, 2018 at 1:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock got caught up in market volatility but has rebounded recently following solid third-quarter results.

What happened

Shares of business management software specialist Pegasystems (PEGA 4.58%) trailed the market last month by shedding 15% compared to a 7% slump in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts

The drop still left the stock in positive territory for the year, up 13% so far in 2018 versus the market's 4% uptick.

So what

Investors weren't reacting to any specific news from Pegasystems last month, but instead the stock appeared to be caught up in the spiking market volatility. Those price swings were especially large for stocks that, like Pegasystems, had posted market-thumping returns earlier in the year.

A customer service representative at work in front of a computer screen.

Image source: Getty Images.

Now what

If investors were worried about a potential growth slowdown for its fiscal third quarter, those concerns were recently put to rest. Pegasystems in early November revealed solid sales gains for the period, along with a few other encouraging financial trends including rising gross profit margin and increased order backlog.

The accelerating shift toward its cloud-based subscription services is reducing reported revenue and earnings right now, and that's making the stock look expensive using traditional valuation metrics. But management believes that the move will ultimately result in rising profits and stronger cash flow.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pegasystems, Inc. Stock Quote
Pegasystems, Inc.
PEGA
$52.72 (4.58%) $2.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.