Magic Software Enterprises (NasdaqGS:MGIC) Valuation Check as Ex-Dividend Date Sparks Fresh Investor Interest

Magic Software Enterprises (MGIC) is heading into an important catalyst, with its shares set to trade ex dividend on December 15. Investors buying before that date qualify for the upcoming cash payout.

See our latest analysis for Magic Software Enterprises.

The ex dividend date comes on the heels of Magic Software Enterprises hitting a fresh 52 week high. That strong backdrop is reflected in its roughly 125% year to date share price return and 131% one year total shareholder return, suggesting momentum has been building rather than fading.

If Magic’s run has you rethinking where growth and income might come from next, it could be a good time to explore high growth tech and AI stocks as potential new ideas.

But with Magic now trading above analysts’ price targets after a triple digit total return, is the market overly optimistic, or does the current price still leave room for investors betting on further growth?

Most Popular Narrative: 49% Overvalued

With Magic Software Enterprises last closing at $26.74 versus a narrative fair value of $18.00, enthusiasm outpaces the valuation framework underpinning future expectations.

The analysts have a consensus price target of $18.0 for Magic Software Enterprises based on their expectations of its future earnings growth, profit margins and other risk factors.

In order for you to agree with the analyst's consensus, you would need to believe that by 2028, revenues will be $708.7 million, earnings will come to $64.8 million, and it would be trading on a PE ratio of 18.6x, assuming you use a discount rate of 11.0%.

Read the complete narrative.

Curious what kind of earnings climb, margin lift, and valuation reset could still justify a lower fair value than today’s price, even after strong growth signals?

Result: Fair Value of $18 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained margin pressure or slower than expected cloud and AI project wins could challenge the bullish growth assumptions embedded in today’s valuation.

Find out about the key risks to this Magic Software Enterprises narrative.

Build Your Own Magic Software Enterprises Narrative

If this view does not quite fit your own thinking, you can dive into the numbers yourself and build a custom narrative in just a few minutes: Do it your way.

A great starting point for your Magic Software Enterprises research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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