Critical Analysis: Pegasystems (NASDAQ:PEGA) & Neonode (NASDAQ:NEON)

Neonode (NASDAQ:NEON) and Pegasystems (NASDAQ:PEGA) are both computer and technology companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, analyst recommendations, risk, dividends, earnings, institutional ownership and profitability.

Insider and Institutional Ownership

11.6% of Neonode shares are owned by institutional investors. Comparatively, 46.9% of Pegasystems shares are owned by institutional investors. 23.9% of Neonode shares are owned by company insiders. Comparatively, 50.1% of Pegasystems shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Neonode	-241.38%	-40.64%	-35.78%
Pegasystems	16.05%	43.49%	18.42%

Valuation & Earnings

This table compares Neonode and Pegasystems”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Neonode	$2.20 million	17.26	-$6.47 million	($0.32)	-7.06
Pegasystems	$1.73 billion	5.32	$99.19 million	$1.49	36.46

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

Risk and Volatility

Neonode has a beta of 0.51, indicating that its stock price is 49% less volatile than the S&P 500. Comparatively, Pegasystems has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Neonode and Pegasystems, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Neonode	1	1	0	0	1.50
Pegasystems	0	2	8	0	2.80

Neonode currently has a consensus price target of $6.00, indicating a potential upside of 165.49%. Pegasystems has a consensus price target of $69.61, indicating a potential upside of 28.15%. Given Neonode’s higher probable upside, analysts clearly believe Neonode is more favorable than Pegasystems.

Summary

Pegasystems beats Neonode on 12 of the 14 factors compared between the two stocks.

About Neonode

Neonode Inc., together with its subsidiaries, develops optical sensing solutions for contactless touch, touch, and gesture sensing in the United States, Japan, South Korea, Germany, Switzerland, France, Sweden, China, and internationally. It also offers software solutions for machine perception to detect and track persons and objects in video streams from cameras and other types of imagers. In addition, the company sells touch sensor modules to OEMs, original design manufacturers, and systems integrators. Further, it licenses its zForce technology to original equipment manufacturers and automotive Tier 1 suppliers, as well as provides non-recurring engineering services related to application development. It serves office equipment, automotive, industrial automation, medical, military, and avionics markets. Neonode Inc. was incorporated in 1997 and is headquartered in Stockholm, Sweden.

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.