Analyzing QAD (NASDAQ:QADB) and Pegasystems (PEGA)

QAD (NASDAQ: QADB) and Pegasystems (NASDAQ:PEGA) are both computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, earnings, valuation, analyst recommendations, risk, institutional ownership and dividends.

Dividends

QAD pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. Pegasystems pays an annual dividend of $0.12 per share and has a dividend yield of 0.2%. QAD pays out -23.3% of its earnings in the form of a dividend. Pegasystems pays out 21.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. QAD is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares QAD and Pegasystems’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
QAD $277.97 million 2.18 -$15.45 million ($1.03) -30.58
Pegasystems $750.27 million 5.40 $26.98 million $0.55 94.55

Pegasystems has higher revenue and earnings than QAD. QAD is trading at a lower price-to-earnings ratio than Pegasystems, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares QAD and Pegasystems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
QAD -6.40% -2.06% -0.86%
Pegasystems 5.67% 9.86% 5.34%

Institutional and Insider Ownership

1.9% of QAD shares are held by institutional investors. Comparatively, 45.8% of Pegasystems shares are held by institutional investors. 67.4% of QAD shares are held by company insiders. Comparatively, 53.6% of Pegasystems shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and price targets for QAD and Pegasystems, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
QAD 0 0 0 0 N/A
Pegasystems 0 1 4 0 2.80

Pegasystems has a consensus target price of $61.75, indicating a potential upside of 18.75%. Given Pegasystems’ higher probable upside, analysts plainly believe Pegasystems is more favorable than QAD.

Volatility & Risk

QAD has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Pegasystems has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500.

Summary

Pegasystems beats QAD on 11 of the 14 factors compared between the two stocks.

QAD Company Profile

QAD Inc. (QAD) is a provider of vertically oriented enterprise software solutions for global manufacturing companies across the automotive, life sciences, consumer products, food and beverage, high technology and industrial products industries. QAD Enterprise Applications enables measurement and control of business processes and supports operational requirements, including financials, manufacturing, demand and supply chain planning, customer management, business intelligence and business process management. QAD delivers components of its solution for a range of mobile platforms. The Company’s mobile suite includes a requisition approval solution, a mobile business intelligence solution, mobile browse capability and mobile application monitoring tools to support system administrators. Its mobile browse capability allows users to view, filter and sort data accessible through QAD Browses within QAD Enterprise Applications using mobile devices.

Pegasystems Company Profile

Pegasystems Inc. develops, markets, licenses and supports software applications for marketing, sales and onboarding, and customer service needs. The Company also offers software applications built on the Pega platform. Its software is designed to assist clients in building, deploying and evolving enterprise applications. Its applications and platform intersect with and encompass several traditional software markets, including Customer Relationship Management (CRM); Business Process Management (BPM); Business Rules Management Systems (BRMS); Dynamic Case Management (DCM); Decision Management, which includes Predictive and Adaptive analytics, and the Vertical Specific Software (VSS) market of industry solutions and packaged applications. It provides implementation, consulting, training, technical support and hosting services to facilitate the use of its software. The Company offers its services to financial, healthcare, insurance, manufacturing, life sciences and other markets.

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