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Why Pegasystems Inc. Stock Soared Today

By Anders Bylund - Jul 30, 2015 at 12:47PM

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12:45 p.m. ET: Second-quarter targets were swept away on a wind of cloud-based software sales. As a result, the business software veteran is exploring all-time highs today.

Image source: Pegasystems.

What's happening: Shares of Pegasystems (PEGA 3.84%) were up 18.7% as of 12:45 p.m. Thursday, setting fresh all-time highs along the way. The maker of business process and customer relationship management software reported second-quarter results on Wednesday night, soundly beating analyst expectations across the board.

Why it's happening: Wall Street was looking for second-quarter earnings or $0.12 per share on $152 million in total sales. Pegasystems blew past both of these consensus estimates with adjusted earnings of $0.14 per diluted share and revenues totaling $162 million. Sales grew 13% year-over-year, sparking a 40% boost on the bottom line.

"We exceeded our revenue goals while building backlog, demonstrating strong execution throughout the organization," said Pegasystems CEO Alan Trefler in a press statement. "We continue to be gratified that the most successful enterprises in the world are choosing Pega to transform their organizations for efficiency and competitive advantage.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

In particular, Pegasystems' cloud-based business tools delivered 85% year-over-year growth on an adjusted basis, and the emerging platform now accounts for 4.4% of the company's overall sales. That's up from 2.7% in the year-ago quarter. But wait -- there will be more:

"We are promoting our Pega Cloud offering as a way to speed client adoption," said Trefler on a conference call with analysts. That approach should keep cloud sales growing in stature within the company at large.

Pegasystems shares have now soared 30% higher year-to-date. The stock trades at a nosebleed-inducing 71 times trailing earnings, but justifies that rarefied pricing level with exceptional growth. The second-quarter report simply underscored the long-term growth trends and highlighted the rise of cloud-based solutions.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Pegasystems. Try any of our Foolish newsletter services free for 30 days.

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