Critical Survey: Pegasystems (NASDAQ:PEGA) versus Synopsys (NASDAQ:SNPS)

Pegasystems (NASDAQ:PEGA) and Synopsys (NASDAQ:SNPS) are both large-cap computer and technology companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, risk, valuation, dividends and profitability.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Pegasystems	16.05%	43.49%	18.42%
Synopsys	31.04%	10.82%	6.16%

Earnings & Valuation

This table compares Pegasystems and Synopsys”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pegasystems	$1.73 billion	5.89	$99.19 million	$1.49	40.34
Synopsys	$6.44 billion	13.47	$2.26 billion	$12.74	36.64

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

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pegasystems	0	2	9	0	2.82
Synopsys	2	6	10	0	2.44

Pegasystems presently has a consensus target price of $70.05, suggesting a potential upside of 16.54%. Synopsys has a consensus target price of $555.33, suggesting a potential upside of 18.98%. Given Synopsys’ higher probable upside, analysts plainly believe Synopsys is more favorable than Pegasystems.

Risk and Volatility

Pegasystems has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500. Comparatively, Synopsys has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500.

Insider & Institutional Ownership

46.9% of Pegasystems shares are held by institutional investors. Comparatively, 85.5% of Synopsys shares are held by institutional investors. 49.7% of Pegasystems shares are held by insiders. Comparatively, 0.6% of Synopsys shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Synopsys beats Pegasystems on 9 of the 14 factors compared between the two stocks.

About Pegasystems

Pegasystems Inc. develops, markets, licenses, hosts, and supports enterprise software in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific. The company provides Pega Infinity, a software portfolio comprising of Pega Customer Decision Hub, a real-time AI-powered decision engine to enhance customer acquisition and experiences across inbound, outbound, and paid media channels; Pega Customer Service to anticipate customer needs, connect customers to people and systems, and automate customer interactions to evolve the customer service experience, as well as to allow enterprises to deliver interactions across channels and enhance employee productivity; and Pega Platform, an intelligent automation software for increasing efficiency of clients’ processes and workflows. It also offers Situational Layer Cake that organizes logic into layers that map to the unique dimensions of a client’s business, such as customer types, lines of business, geographies, etc.; Pega Express Methodology and low code that connects enterprise data and systems to customer experience channels; Pega Cloud that allows clients to develop, test, and deploy applications; Pega Catalyst, which helps clients to transform and prototype their customer journeys; Pega Academy, which offers instructor-led and online training to its employees, clients, and partners; and global service assurance and client support services. It primarily markets its software and services to financial services, healthcare, communications and media, government, insurance, manufacturing and high tech, and consumer services markets through a direct sales force, as well as partnerships with technology providers and application developers. Pegasystems Inc. was incorporated in 1983 and is headquartered in Cambridge, Massachusetts.

About Synopsys

Synopsys, Inc. provides electronic design automation software products used to design and test integrated circuits. It operates in three segments: Design Automation, Design IP, and Software Integrity. The company offers Digital and Custom IC Design solution that provides digital design implementation solutions; Verification solution that offers virtual prototyping, static and formal verification, simulation, emulation, field programmable gate array (FPGA)-based prototyping, and debug solutions; and FPGA design products that are programmed to perform specific functions. It also provides intellectual property (IP) solutions for USB, PCI Express, DDR, Ethernet, MIPI, HDMI, and Bluetooth low energy applications; logic libraries and embedded memories; processor cores, software, and application-specific instruction-set processor tools for embedded applications; security IP solutions; IP solutions for automotive market; and system-on-chip (SoC) infrastructure IP, datapath and building block IP, and verification IP products, as well as mathematical and floating-point components, and Arm AMBA interconnect fabric and peripherals. In addition, the company offers HAPS FPGA-based prototyping systems; virtual prototyping solutions; and Platform Architect solutions for SoC architecture analysis and optimization, as well as optical products, and mechatronic simulations. Further, it provides security and quality testing products, managed services, programs and professional services, and training that enable its customers to detect and remediate security vulnerabilities, and defects in the software development lifecycle, as well as manufacturing solutions. Additionally, the company provides intelligent orchestration solution, software risk manager, and black duck software composition analysis tools. It serves electronics, financial services, automotive, medicine, energy, and industrial areas. The company was incorporated in 1986 and is headquartered in Sunnyvale, California.