Pegasystems Inc (PEGA)

Return on equity (ROE)

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Net income	US$ in thousands	99,189	67,808	-345,582	-63,040	-61,373
Total stockholders’ equity	US$ in thousands	585,480	353,838	130,843	416,088	542,172
ROE		16.94%	19.16%	-264.12%	-15.15%	-11.32%

December 31, 2024 calculation

ROE = Net income ÷ Total stockholders’ equity
= $99,189K ÷ $585,480K
= 16.94%

The analysis of Pegasystems Inc.'s return on equity (ROE) over the period from December 31, 2020, to December 31, 2024, reveals significant fluctuations.

In 2020, the company reported a negative ROE of approximately -11.32%, indicating that it was generating losses relative to shareholder equity during that period. The subsequent year, 2021, showed an increase in the negative ROE, declining further to about -15.15%. This deterioration suggests a worsening of profitability or increased losses relative to equity in that year.

The most notable change occurred in 2022, where the ROE dramatically decreased to roughly -264.12%. Such a substantial decline indicates an extremely poor performance, possibly due to significant net losses, asset impairments, or extraordinary charges impacting net income severely while equity remained relatively stable or was insufficient to absorb those losses. This level of negative ROE suggests that the company was experiencing substantial financial distress during this year.

A marked turnaround is evident in 2023, when ROE improved to approximately 19.16%. This shift from a deeply negative figure to a positive one implies a significant restoration of profitability, perhaps driven by operational improvements, increased revenues, cost management, or other strategic initiatives resulting in net income surpassing shareholder equity. The positive ROE indicates effective utilization of shareholders’ funds to generate profit during this period.

In 2024, the ROE slightly decreased to about 16.94%, maintaining a positive and relatively stable profitability profile. While below the 2023 figure, this level still reflects a healthy return on shareholders’ equity, suggesting ongoing operational stability and profitability.

Overall, Pegasystems Inc. experienced a severe decline in profitability culminating in a large negative ROE in 2022, followed by a significant recovery in 2023 and stabilization into 2024. The pattern indicates a period of financial distress followed by a substantial turnaround, highlighting the company's recovery efforts and improved financial performance in recent years.