Pegasystems (NASDAQ:PEGA – Get Free Report) and Smith Micro Software (NASDAQ:SMSI – Get Free Report) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, analyst recommendations, institutional ownership, valuation, earnings and profitability.
Profitability
This table compares Pegasystems and Smith Micro Software’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Pegasystems | 20.04% | 30.05% | 14.07% |
| Smith Micro Software | -165.35% | -55.78% | -41.02% |
Risk and Volatility
Pegasystems has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500. Comparatively, Smith Micro Software has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Pegasystems | 0 | 3 | 8 | 0 | 2.73 |
| Smith Micro Software | 1 | 0 | 1 | 0 | 2.00 |
Pegasystems presently has a consensus price target of $63.70, indicating a potential upside of 85.99%. Smith Micro Software has a consensus price target of $2.50, indicating a potential upside of 217.22%. Given Smith Micro Software’s higher possible upside, analysts clearly believe Smith Micro Software is more favorable than Pegasystems.
Valuation and Earnings
This table compares Pegasystems and Smith Micro Software”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Pegasystems | $1.75 billion | 3.28 | $393.44 million | $1.86 | 18.41 |
| Smith Micro Software | $17.36 million | 1.16 | -$29.33 million | ($1.38) | -0.57 |
Pegasystems has higher revenue and earnings than Smith Micro Software. Smith Micro Software is trading at a lower price-to-earnings ratio than Pegasystems, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
46.9% of Pegasystems shares are held by institutional investors. Comparatively, 20.8% of Smith Micro Software shares are held by institutional investors. 48.4% of Pegasystems shares are held by insiders. Comparatively, 34.7% of Smith Micro Software shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Summary
Pegasystems beats Smith Micro Software on 13 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 Smith Micro Software
Smith Micro Software, Inc. engages in the development and sale of software to enhance the mobile experience to wireless and cable service providers in the Americas, Europe, the Middle East, and Africa. The company offers SafePath Family, SafePath IoT, SafePath Home, and SafePath Premium product suite, which provides tools to protect digital lifestyles and manage connected devices inside and outside the home; and CommSuite, a messaging platform that helps mobile service provides deliver a next-generation voicemail experience to mobile subscribers, as well as enables multi-language voice-to-text (VTT) transcription messaging. It also offers ViewSpot, a retail display management platform that provides on-screen and interactive demos to wireless carriers and other smartphone retailers; and technical support and customer services. Smith Micro Software, Inc. was founded in 1982 and is headquartered in Pittsburgh, Pennsylvania.
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