Analyzing QAD (QADB) & Pegasystems (PEGA)

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

Dividends

Pegasystems pays an annual dividend of $0.12 per share and has a dividend yield of 0.2%. QAD pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. Pegasystems pays out 20.3% of its earnings in the form of a dividend. QAD pays out -23.3% 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 & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Pegasystems $750.27 million 5.22 $26.98 million $0.59 85.25
QAD $277.97 million 2.20 -$15.45 million ($1.03) -30.83

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.

Insider and Institutional Ownership

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

Profitability

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

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

Analyst Recommendations

This is a summary of current ratings for Pegasystems and QAD, as reported by MarketBeat.com.

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

Pegasystems presently has a consensus price target of $61.75, indicating a potential upside of 22.76%. Given Pegasystems’ higher possible upside, equities research analysts clearly believe Pegasystems is more favorable than QAD.

Risk & Volatility

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

Summary

Pegasystems beats QAD on 12 of the 15 factors compared between the two stocks.

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.

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.

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