PEGA - Pegasystems Message Board

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Technology Stocks : PEGA - Pegasystems

PEGA 59.07

+0.2%

3:59 PM EST

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To: Mark B. who wrote (123)	8/9/1997 10:35:00 PM
From: Clam Clam	of 504

>> Reported earnings will go in the tank if they adopt a "more" generally accepted accounting method for revenue recognition. I agree with you that this stock is very aggressively valued relative to its peers but I think the "license interest income" reported on the income statement was only $.01 last quarter. I get this number by taking the license interest income #, multiplying by (1 - overall tax rate) and dividing by the weighted shares out in the quarter. Changing accounting policies would be great but it wouldn't change the earnings estimates much more than $.01 a quarter, by my calculations. I don't think they are reporting the PV as "revenues" or are they? I haven't looked too closely into it but I am curious. Getting a premium for being a vertical market specialist just doesn't make sense to me. Montgomery Securities has the opinion that there will be two kinds of winners in this software segment: those vertictally focused (specialists) and those with integrated solutions applicable to many different industries. I would agree with this assertion from a business perspective but I don't think that argument carries over into getting the same valuation. PEGA is in a nice niche but I would much rather own the latter type of company, given similar valuations. I have never shorted companies whose earnings outlook was as bright as PEGA's but I gotta say this one is tempting based on relative valuation. I will call the Montgomery analyst and see if he is good for anything.

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