I love slow market days -- like today. It provides the time to peek under the hood of companies with interesting products.

Under the microscope today is Motley Fool Hidden Gems newsletter recommendation Pegasystems (NASDAQ:PEGA), a provider of rules-based business process management (BPM) software.

For those who remember back to the days of work-flow systems and reengineering, BPM is the buzzword being used to describe the current generation of systems that help businesses define, based on rules, how their systems work. One advantage of BPM is that a company can ensure rules are followed (which is extremely important if the data is security-sensitive, such as banking and health care records).

There is no shortage of BPM vendors. There are more than 100. What drew my attention to Pegasystems was its recent earnings shortfalls (and falling stock price) and industry recognition after industry recognition.

The company's earnings woes are because of the company parting company with a division of First Data Corp. (NYSE:FDC). What was supposed to be open up new markets has, so far, caused a lull. But that should change in 2005.

Investors should note that the company's third-quarter earnings report did not benefit from the closing of two large orders. They are on the books now. Analysts expect earnings next fiscal year to grow 68% -- giving the stock a forecasted price-to-earnings of 25 times. That's not bad for a small company in a highly fragmented industry that appears to be ready to grow.

The stock is down 2% from where it was 52 weeks ago. That is a reflection of what has gone wrong in 2004. But those looking ahead will find a cash-rich company with gross margins over 70% -- a reflection of the "light business model" software vendors enjoy. Any uptick in orders hits the bottom line like a sledgehammer.

It is unlikely that a dark knight will arrive and sweep Pegasystems off its feet, like Oracle (NASDAQ:ORCL) did with PeopleSoft (NASDAQ:PSFT). Pegasystems insiders own 66.5% of the stock. But the insiders only make money by having Pegasystems succeed -- a good situation for shareholders looking for companies poised for success.

Interested in small companies with great growth opportunities? You are a mouse click away from a free trial to the Motley Fool Hidden Gems newsletter. Put Motley Fool co-founder Tom Gardner to work for you looking for oversized stock market gains.

The Motley Fool is investors talking to investors. Join in the discussion of Pegasystems on the Motley Fool discussion boards.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.