PEGA
Pegasystems Inc.
$36.75
Platform & Compounding FCF
80%
Two-stage FCF DCF
Moderate
·
Conviction
Undervalued
Trading 35.7% below fair value
You pay
$36.75
Bear
$41.32
Fair
$57.17
Bull
$73.29
Bear
$41.32
+12.4%
7% stage 1 growth, 11% discount
Fair
$57.17
+55.6%
11% stage 1 growth, 11% discount
Bull
$73.29
+99.4%
15% stage 1 growth, 11% discount
Adjust Assumptions
11.4%
11.0%
3.0%
Key Value Driver
FCF growth rate (11% base case)
Terminal Value % of EV
40%
Implied Market Multiple
15.1x
Market is pricing in (growth)
5.1%
vs 11.4% base
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (24 analysts)
$37.00
Divergence from AlphaVal
55%
Summary
Using a two-stage FCF DCF with 11% growth decelerating over 15 years, discounted at 11%, the base-case intrinsic value is $57.17 per share.
Warnings
Stock-based employee pay equals 39% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $37.00 (from 24 analysts). Our estimate is 55% above the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions