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Some Pegasystems Inc. (NASDAQ:PEGA) shareholders are probably rather concerned to see the share price fall 34% over the last three months. But that doesn't change the fact that the returns over the last year have been pleasing. After all, the share price is up a market-beating 19% in that time.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
We check all companies for important risks. See what we found for Pegasystems in our free report.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Pegasystems was able to grow EPS by 43% in the last twelve months. This EPS growth is significantly higher than the 19% increase in the share price. So it seems like the market has cooled on Pegasystems, despite the growth. Interesting. Having said that, the market is still optimistic, given the P/E ratio of 58.95.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
It's nice to see that Pegasystems shareholders have received a total shareholder return of 19% over the last year. That's including the dividend. Notably the five-year annualised TSR loss of 2% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.