Stock Analysis
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- NasdaqGS:MGIC
Should You Think About Buying Magic Software Enterprises Ltd. (NASDAQ:MGIC) Now?
Magic Software Enterprises Ltd. (NASDAQ:MGIC), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$17.49 and falling to the lows of US$13.55. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Magic Software Enterprises' current trading price of US$13.56 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Magic Software Enterprises’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Magic Software Enterprises
What's The Opportunity In Magic Software Enterprises?
The stock is currently trading at US$13.56 on the share market, which means it is overvalued by 38% compared to my intrinsic value of $9.86. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Magic Software Enterprises’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Magic Software Enterprises look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 31% over the next couple of years, the future seems bright for Magic Software Enterprises. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? MGIC’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MGIC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MGIC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for MGIC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Magic Software Enterprises you should be aware of.
If you are no longer interested in Magic Software Enterprises, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
What are the risks and opportunities for Magic Software Enterprises?
Magic Software Enterprises Ltd. provides proprietary application development, business process integration, vertical software solutions, and information technologies (IT) outsourcing software services in Israel and internationally.
Rewards
Price-To-Earnings ratio (17.3x) is below the Software industry average (43.3x)
Earnings are forecast to grow 12.89% per year
Earnings grew by 53.2% over the past year
Risks
No risks detected for MGIC from our risks checks.
Further research on
Magic Software Enterprises
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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.
About NasdaqGS:MGIC
Magic Software Enterprises
Magic Software Enterprises Ltd. provides proprietary application development, business process integration, vertical software solutions, and information technologies (IT) outsourcing software services in Israel and internationally.
Solid track record with excellent balance sheet and pays a dividend.
