Pegasystems Inc (PEGA)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 73.91% | 73.58% | 72.03% | 72.24% | 69.44% |
| Operating profit margin | 8.27% | 5.65% | -6.65% | -7.82% | -14.11% |
| Pretax margin | 9.53% | 6.66% | -12.28% | -10.89% | -12.27% |
| Net profit margin | 6.63% | 4.73% | -26.22% | -5.20% | -6.03% |
Analyzing the profitability ratios of Pegasystems Inc. over the period from December 31, 2020, to December 31, 2024, reveals notable trends and shifts in the company's financial performance.
Gross Profit Margin:
The gross profit margin demonstrated a steady upward trajectory, beginning at 69.44% in 2020 and increasing to 73.91% by 2024. This consistent improvement indicates an enhancement in the company's ability to control cost of goods sold relative to revenue, reflecting potentially better pricing strategies, cost management, or a more favorable product mix.
Operating Profit Margin:
Initially, the company experienced negative operating margins of -14.11% in 2020, improving to -7.82% in 2021 and further refining to -6.65% in 2022. The pivotal turning point occurs in 2023, where operating profit margin shifts to a positive value of 5.65%, and continues to improve to 8.27% in 2024. This progression signifies a transition from operating losses towards operational profitability, suggesting effective cost management and scaling efficiencies.
Pretax Margin:
The pretax margin follows a similar pattern, beginning with negative figures in 2020 (-12.27%) and 2021 (-10.89%), and remaining negative in 2022 (-12.28%). The improvement becomes evident in 2023, with a return to positive territory at 6.66%, and further increase to 9.53% in 2024. This indicates that after accounting for operating expenses, interest, and taxes, the company is generating earnings before tax, reflecting enhanced overall profitability.
Net Profit Margin:
The net profit margin, which accounts for all expenses, taxes, and other income, shows a negative trend through 2020 (-6.03%) and 2021 (-5.20%), with a significant decline in 2022 to -26.22%. However, there is a notable turnaround starting in 2023, with a net margin of 4.73%, and continued improvement to 6.63% in 2024. The shift from negative to positive net margins indicates that the company has transitioned from net losses to net earnings, marking a substantial enhancement in overall profitability.
Overall, Pegasystems Inc. has exhibited a progressive recovery and improvement in profitability ratios over the analyzed period. The transition from negative to positive margins across operating, pretax, and net profit demonstrates operational and financial restructuring success. The steady increase in gross profit margin alongside the turnarounds in operating and net margins suggests improved operational efficiency, better cost control, and effective revenue generation strategies. These developments point to a positive trajectory of profitability and potential future financial health for the company.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 7.01% | 5.36% | -6.46% | -5.94% | -8.95% |
| Return on assets (ROA) | 5.61% | 4.49% | -25.45% | -3.96% | -3.83% |
| Return on total capital | 25.53% | 28.92% | -117.70% | -32.83% | -19.46% |
| Return on equity (ROE) | 16.94% | 19.16% | -264.12% | -15.15% | -11.32% |
The profitability analysis of Pegasystems Inc. over the period from 2020 to 2024 reveals a significant transformation in its financial performance. The data indicates a historical trend of negative returns during the years 2020 through 2022, followed by a notable improvement starting in 2023.
Specifically, the Operating Return on Assets (Operating ROA) demonstrated a declining trajectory through 2020 to 2022, with values of -8.95%, -5.94%, and -6.46%, respectively. This suggests that during this period, the company's core operations were not generating positive returns relative to its total assets. However, a marked turnaround is observed in 2023 when the Operating ROA shifts to a positive 5.36%, which further improves to 7.01% in 2024, indicating that operational efficiencies and profitability have significantly improved.
Similarly, the standard Return on Assets (ROA) followed a comparable pattern, remaining negative across 2020 to 2022, with values of -3.83%, -3.96%, and a sharp decline to -25.45% in 2022. This extreme drop in 2022 reflects substantial losses relative to total assets. The positive shift in 2023 to 4.49%, and a further increase to 5.61% in 2024, underscores an enhanced overall profitability status, aligning with operational improvements.
The Return on Total Capital portrays an even more dramatic turnaround. Negative returns were recorded in 2020 (-19.46%) and 2021 (-32.83%), with a severe decline to -117.70% in 2022, indicating that the company’s returns on invested capital were deeply negative, possibly due to high costs or impairments. In 2023, ROTC transitions into positive territory at 28.92% and maintains a strong 25.53% in 2024, signifying that the company is effectively generating income on its capital investments post-2022.
Finally, the Return on Equity (ROE), which measures profitability from shareholders’ perspective, shares a similar historic negative trend, registering at -11.32% in 2020 and -15.15% in 2021. A significant decline to -264.12% occurs in 2022, reflecting extensive losses or potential write-downs impacting shareholders' equity. However, in 2023, ROE recovers to 19.16%, maintaining a favorable level at 16.94% in 2024, indicating that the company has effectively restored profitability and increased value for its shareholders.
Overall, the data delineates a period of industry-specific or company-specific difficulties leading up to 2022, followed by a pronounced recovery starting in 2023. The recent years portray a more positive profitability landscape, driven by improved operational efficiency, better asset utilization, and enhanced return on shareholder equity.