It's been a while since we last checked in on business process management software maker and ex-Motley Fool Hidden Gems recommendation Pegasystems
Wall Street Wisdom:
- General consensus. Only two analysts follow Pegasystems these days. One says "buy it;" the other says to hold.
- Revenues. Analysts believe that Pegasystems boosted its quarterly revenues 7% year over year, to $28.1 million.
- Earnings. Profits, in contrast, are believed to have fallen 38% to $0.05 per share. If correct, that will bring the company to $0.10 for the year -- well above the low range of its guidance at $0.03, but far short of the $0.15 at the top.
Margin watch:
Long after the firm has ceased to be able to blame its subpar operating performance on its parting of ways with First Data
Margins % |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
---|---|---|---|---|---|---|
Gross |
72 |
71.9 |
72.5 |
71.5 |
69.3 |
68.1 |
Op. |
8.6 |
4.7 |
6 |
4.1 |
0.8 |
2.8 |
Net |
11.2 |
8.7 |
7.8 |
6.1 |
4.3 |
4.7 |
Foolish forensics:
As lousy as Pegasystems' GAAP numbers look, however, they don't necessarily tell the whole picture. Behind the scenes, the company has already generated $16.7 million in free cash flow year to date -- nine times its reported profits. If the analysts are right and Pegasystems earns a dime per share for the year, that will bring its accounting profits up only to $3.6 million. In contrast, if free cash keeps flowing at its current rate, the company could generate as much as $22.3 million in cash profits. Pegasystems' business is more profitable than it appears. Keep an eye on free cash flow tomorrow, but don't send this horse to the glue factory just yet.
Fool contributorRich Smithdoes not own shares of either company named above.