NasdaqGS:MGIC

Stock Analysis Report

Magic Software Enterprises

Executive Summary

Magic Software Enterprises Ltd. provides proprietary application development, business process integration, vertical software solutions, and IT outsourcing software services in Israel and internationally.

Rewards

Trading at 26.6% below its fair value

Earnings are forecast to grow 31.36% per year

Risk Analysis

Unstable dividend track record

Shareholders have been diluted in the past year



Snowflake Analysis

Undervalued with excellent balance sheet.


Similar Companies

Share Price & News

How has Magic Software Enterprises's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: MGIC has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

0.3%

MGIC

0.2%

US Software

0.8%

US Market


1 Year Return

24.4%

MGIC

28.5%

US Software

17.8%

US Market

Return vs Industry: MGIC underperformed the US Software industry which returned 28.5% over the past year.

Return vs Market: MGIC exceeded the US Market which returned 17.8% over the past year.


Shareholder returns

MGICIndustryMarket
7 Day0.3%0.2%0.8%
30 Day9.2%1.1%1.8%
90 Day7.2%4.2%4.1%
1 Year28.8%24.4%30.5%28.5%20.4%17.8%
3 Year53.7%39.7%125.6%116.5%45.9%36.4%
5 Year75.1%51.3%181.2%161.4%68.1%49.6%

Price Volatility Vs. Market

How volatile is Magic Software Enterprises's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Magic Software Enterprises undervalued compared to its fair value and its price relative to the market?

26.6%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: MGIC ($9.85) is trading below our estimate of fair value ($13.42)

Significantly Below Fair Value: MGIC is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: MGIC is good value based on its PE Ratio (26.8x) compared to the Software industry average (44.5x).

PE vs Market: MGIC is poor value based on its PE Ratio (26.8x) compared to the US market (18.4x).


Price to Earnings Growth Ratio

PEG Ratio: MGIC is good value based on its PEG Ratio (0.9x)


Price to Book Ratio

PB vs Industry: MGIC is good value based on its PB Ratio (1.9x) compared to the US Software industry average (5.7x).


Next Steps

Future Growth

How is Magic Software Enterprises forecast to perform in the next 1 to 3 years based on estimates from 2 analysts?

31.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: MGIC's forecast earnings growth (31.4% per year) is above the savings rate (1.7%).

Earnings vs Market: MGIC's earnings (31.4% per year) are forecast to grow faster than the US market (14.2% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: MGIC's revenue (10.7% per year) is forecast to grow faster than the US market (7.4% per year).

High Growth Revenue: MGIC's revenue (10.7% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if MGIC's Return on Equity is forecast to be high in 3 years time


Next Steps

Past Performance

How has Magic Software Enterprises performed over the past 5 years?

3.3%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: MGIC has high quality earnings.

Growing Profit Margin: MGIC's current net profit margins (5.8%) are lower than last year (6.9%).


Past Earnings Growth Analysis

Earnings Trend: MGIC's earnings have grown by 3.3% per year over the past 5 years.

Accelerating Growth: MGIC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: MGIC had negative earnings growth (-6.2%) over the past year, making it difficult to compare to the Software industry average (15.8%).


Return on Equity

High ROE: MGIC's Return on Equity (9%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Magic Software Enterprises's financial position?


Financial Position Analysis

Short Term Liabilities: MGIC's short term assets ($203.2M) exceed its short term liabilities ($63.3M).

Long Term Liabilities: MGIC's short term assets ($203.2M) exceed its long term liabilities ($54.0M).


Debt to Equity History and Analysis

Debt Level: MGIC's debt to equity ratio (10%) is considered satisfactory.

Reducing Debt: MGIC's debt to equity ratio has increased from 1.4% to 10% over the past 5 years.

Debt Coverage: MGIC's debt is well covered by operating cash flow (128.6%).

Interest Coverage: MGIC's interest payments on its debt are well covered by EBIT (63.8x coverage).


Balance Sheet

Inventory Level: MGIC has a low level of unsold assets or inventory.

Debt Coverage by Assets: MGIC's debt is covered by short term assets (assets are 7.2x debt).


Next Steps

Dividend

What is Magic Software Enterprises's current dividend yield, its reliability and sustainability?

3.10%

Current Dividend Yield


Dividend Yield vs Market

company3.1%marketbottom25%1.4%markettop25%3.7%industryaverage1.4%forecastin3Yearsn/a

Current dividend yield vs market & industry

Notable Dividend: MGIC's dividend (3.1%) is higher than the bottom 25% of dividend payers in the US market (1.43%).

High Dividend: MGIC's dividend (3.1%) is low compared to the top 25% of dividend payers in the US market (3.72%).


Stability and Growth of Payments

Stable Dividend: MGIC's dividend payments have been volatile in the past 10 years.

Growing Dividend: MGIC's dividend payments have fallen over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: At its current payout ratio (83.3%), MGIC's payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: Insufficient data to determine if a dividend will be paid in 3 years and that it will be covered by earnings.


Next Steps

Management

What is the CEO of Magic Software Enterprises's salary, the management and board of directors tenure and is there insider trading?

7.4yrs

Average management tenure


CEO

Guy Bernstein (51yo)

9.7yrs

Tenure

0

Mr. Guy Bernstein is the Chief Executive Officer of Magic Software Enterprises Ltd. since April 2010 and has been its Director since January 2007. Mr. Bernstein served as Chairman of the Board at Magic Sof ...


Management Age and Tenure

7.4yrs

Average Tenure

50yo

Average Age

Experienced Management: MGIC's management team is seasoned and experienced (7.4 years average tenure).


Board Age and Tenure

5.0yrs

Average Tenure

51yo

Average Age

Experienced Board: MGIC's board of directors are considered experienced (5 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 7.3%.


Management Team

  • Arie Kilman (66yo)

    Chairman of Software Solutions Division

    • Tenure: 2.9yrs
    • Compensation: US$1.04m
  • Guy Bernstein (51yo)

    CEO & Director

    • Tenure: 9.7yrs
  • Amit Birk (48yo)

    VP of Mergers & Acquisitions

    • Tenure: 20.6yrs
    • Compensation: US$259.88k
  • Asaf Berenstin (41yo)

    Chief Financial Officer

    • Tenure: 9.7yrs
  • Hanan Shahaf (67yo)

    Chief Executive Officer of Roshtov Software Industries Ltd

    • Tenure: 3.4yrs
    • Compensation: US$301.80k
  • Yuval Baruch (52yo)

    Chief Executive Officer of Hermes Logistics Technologies

    • Tenure: 7.3yrs
    • Compensation: US$288.69k
  • Yuval Lavi

    Vice President of Technology & Innovation

    • Tenure: 0yrs
  • Arik Faingold (42yo)

    President of Integration Solutions Division

    • Tenure: 7.4yrs
    • Compensation: US$517.67k
  • Silver Etzioni

    Chief Marketing Officer

    • Tenure: 0.9yrs
  • Yakov Tsaroya (49yo)

    Chief Executive Officer of Coretech Consulting Services and Fusion Solutions

    • Tenure: 13.9yrs
    • Compensation: US$571.00k

Board Members

  • Naamit Salomon (55yo)

    Director

    • Tenure: 16.8yrs
  • Guy Bernstein (51yo)

    CEO & Director

    • Tenure: 9.7yrs
  • Sagi Schliesser (47yo)

    External Director

    • Tenure: 4.1yrs
  • Ron Ettlinger (52yo)

    External Director

    • Tenure: 5yrs
  • Avi Zakay (40yo)

    Independent Director

    • Tenure: 1.8yrs

Company Information

Magic Software Enterprises Ltd.'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Magic Software Enterprises Ltd.
  • Ticker: MGIC
  • Exchange: NasdaqGS
  • Founded: 1983
  • Industry: Application Software
  • Sector: Software
  • Market Cap: US$482.555m
  • Shares outstanding: 48.89m
  • Website: https://www.magicsoftware.com

Number of Employees


Location

  • Magic Software Enterprises Ltd.
  • 5 Haplada Street
  • PO Box 5011
  • Or Yehuda
  • 60218
  • Israel

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
MGICNasdaqGS (Nasdaq Global Select)YesOrdinary SharesUSUSDAug 1991
MGICTASE (The Tel-Aviv Stock Exchange)YesOrdinary SharesILILSAug 1991
MGKDB (Deutsche Boerse AG)YesOrdinary SharesDEEURAug 1991

Biography

Magic Software Enterprises Ltd. provides proprietary application development, business process integration, vertical software solutions, and IT outsourcing software services in Israel and internationally.  ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/11 23:38
End of Day Share Price2019/12/11 00:00
Earnings2019/09/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.