Magic Software Enterprises Ltd. Just Missed Earnings - But Analysts Have Updated Their Models

Last week, you might have seen that Magic Software Enterprises Ltd. (NASDAQ:MGIC) released its third-quarter result to the market. The early response was not positive, with shares down 2.5% to US$10.96 in the past week. Statutory earnings per share of US$0.17 unfortunately missed expectations by 11%, although it was encouraging to see revenues of US$143m exceed expectations by 4.1%. Earnings are an important time for investors, as they can track a company's performance, look at what the analyst is forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analyst is expecting for next year.

View our latest analysis for Magic Software Enterprises

Taking into account the latest results, the most recent consensus for Magic Software Enterprises from sole analyst is for revenues of US$566.3m in 2025. If met, it would imply an okay 5.8% increase on its revenue over the past 12 months. Per-share earnings are expected to grow 14% to US$0.81. In the lead-up to this report, the analyst had been modelling revenues of US$564.1m and earnings per share (EPS) of US$0.80 in 2025. The consensus analyst doesn't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With the analyst reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 7.1% to US$15.00. It looks as though they previously had some doubts over whether the business would live up to their expectations.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Magic Software Enterprises' revenue growth is expected to slow, with the forecast 4.6% annualised growth rate until the end of 2025 being well below the historical 12% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. Factoring in the forecast slowdown in growth, it seems obvious that Magic Software Enterprises is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analyst reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analyst also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Magic Software Enterprises' revenue is expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analyst believes the intrinsic value of the business is likely to improve over time.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2026, which can be seen for free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with Magic Software Enterprises .

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.