Pegasystems (NASDAQ:PEGA) & Open Text (NASDAQ:OTEX) Financial Contrast

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

Institutional & Insider Ownership

46.9% of Pegasystems shares are held by institutional investors. Comparatively, 70.4% of Open Text shares are held by institutional investors. 48.4% of Pegasystems shares are held by insiders. Comparatively, 10.6% of Open Text shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Pegasystems pays an annual dividend of $0.12 per share and has a dividend yield of 0.4%. Open Text pays an annual dividend of $1.12 per share and has a dividend yield of 4.2%. Pegasystems pays out 7.5% of its earnings in the form of a dividend. Open Text pays out 43.4% 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Pegasystems	16.86%	35.22%	15.55%
Open Text	12.26%	25.76%	7.70%

Earnings & Valuation

This table compares Pegasystems and Open Text”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pegasystems	$1.75 billion	3.18	$393.44 million	$1.61	21.07
Open Text	$5.25 billion	1.23	$643.02 million	$2.58	10.31

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

Volatility & Risk

Pegasystems has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Open Text has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Pegasystems and Open Text, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pegasystems	2	7	6	0	2.27
Open Text	0	10	3	0	2.23

Pegasystems presently has a consensus price target of $45.73, suggesting a potential upside of 34.77%. Open Text has a consensus price target of $30.95, suggesting a potential upside of 16.40%. Given Pegasystems’ stronger consensus rating and higher probable upside, research analysts plainly believe Pegasystems is more favorable than Open Text.

Summary

Pegasystems beats Open Text on 10 of the 16 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 Open Text

Open Text Corporation provides information management software and solutions. The company offers content services, which includes content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving; and operates experience cloud platform that provides customer experience and web content management, digital asset management, customer analytics, AI and insights, e-discovery, digital fax, omnichannel communications, secure messaging, and voice of customer, as well as customer journey, testing, and segmentation. It also provides cybersecurity cloud solutions to protect, prevent, detect, respond and quickly recover from threats across endpoints, network, applications, IT infrastructure and data, AI-led threat intelligence; and to protect critical information and processes through threat intelligence, forensics, identity, encryption, and cloud-based application security. In addition, the company offers business network cloud for digital supply chains and secure e-commerce ecosystems including digitize and automate procure-to-pay and order-to-cash processes; IT operations management cloud for automation and advancement of IT support and asset management; and analytics & AI cloud solutions that offers artificial intelligence with practical usage to provide organizations with actionable insights and better automation, such as visualizations, advanced natural language processing and understanding, and integrated computer vision capabilities. In addition, it provides application automation cloud, developers cloud, and services. Further, it has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, DXC Technology Company, Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting LLP, Hewlett Packard Enterprises, and Tata Consultancy Services. Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.