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Magic Software Enterprises Ltd (MGIC)
NASDAQ:MGIC
Top Page
Magic
(NASDAQ:MGIC)
77Outperform
Positive Factors
Market Performance
North America stabilization continues with the U.S. market showing encouraging signs of early recovery momentum.
Merger and Acquisition
The merger with Matrix I.T Ltd. is seen as a strategic opportunity to strengthen Magic’s market position through an expanded product and service offering at a greater, and more resilient, global scale.
Negative Factors
Analyst Rating
As a result of the merger, the stock is downgraded to a Market Perform rating.
Magic (MGIC) vs. S&P 500 (SPY)
Market Cap
$657.44M
Dividend Yield3.29%
Average Volume (3M)80.99K
Price to Earnings (P/E)17.8
Beta (1Y)0.52
Revenue Growth-3.80%
EPS Growth-9.03%
CountryUS
Employees3,628
SectorTechnology
Sector Strength45
IndustrySoftware
Share Statistics
EPS (TTM)0.75
Shares Outstanding49,099,304
10 Day Avg. Volume162,495
30 Day Avg. Volume80,986
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.23
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$16.00Price Target Upside14.37% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Magic Business Overview & Revenue Model
Company DescriptionMagic Software Enterprises Ltd. engages in the provision of proprietary application development and business process integration platforms, vertical software solutions, and vendor of information technology (IT) outsourcing software services. It operates through Software Services and IT Professional Services segments. The Software Services segment includes proprietary and non-proprietary software technology and complementary services. The IT Professional Services segment offers services in the areas of infrastructure design and delivery; application development; technology planning and implementation services; communications services and solutions; and supplemental staffing services. The company was founded by David Assia in February 1983 and is headquartered in Or Yehuda, Israel.
How the Company Makes MoneyMagic (MGIC) generates revenue primarily through the premiums collected from issuing private mortgage insurance policies. These premiums are paid by borrowers or lenders and provide coverage for mortgage loans, thereby reducing the risk for lenders in case of borrower default. The company earns additional income from investments made with the collected premiums, which are used to generate returns and enhance profitability. Key revenue streams include monthly insurance premiums, single upfront premiums, and investment income. MGIC's earnings are also influenced by regulatory factors, housing market conditions, and interest rates, which affect both the demand for mortgage insurance and the performance of their investment portfolio. The company maintains strategic partnerships with mortgage lenders and financial institutions to expand its market reach and secure a steady flow of new policyholders.
Magic Financial Statement Overview
Summary
Magic's financial statements show strong stability with a solid balance sheet and healthy cash flow. Despite a slight decline in revenue growth and net profit margin, the company remains operationally efficient. The balance sheet's low leverage and high equity provide financial stability, though revenue growth challenges remain.Income Statement
Magic's income statement shows stable revenues with a slight decline in the TTM period. Gross profit margin is solid at around 28.4%, but net profit margin has decreased slightly to around 6.5% in the TTM. EBIT and EBITDA margins remain healthy, around 10.8% and 14.7% respectively, indicating operational efficiency. However, the revenue growth has been stagnant recently, with a slight decline in the TTM compared to the previous year, suggesting challenges in maintaining growth momentum.75
Positive
Balance Sheet
The balance sheet reflects a strong equity position with an equity ratio of approximately 53.1%, showcasing financial stability. The debt-to-equity ratio is manageable at around 0.33, indicating a low level of leverage compared to equity. Return on Equity (ROE) is modest, indicating efficient use of shareholder funds but with room for improvement. Overall, the balance sheet is strong, with low risk of financial distress.80
Positive
Cash Flow
Cash flow analysis reveals a decrease in operating cash flow to net income ratio in the TTM, but the free cash flow remains positive and robust. The free cash flow growth rate has declined, reflecting a tighter cash conversion cycle. Despite this, the company maintains a healthy free cash flow to net income ratio, ensuring sufficient liquidity to support operations and potential investments.78
Positive
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 535.48M | 535.05M | 566.79M | 480.32M | 371.19M | 325.63M | Gross Profit |
| 152.18M | 152.99M | 155.35M | 132.99M | 109.59M | 102.13M | EBIT |
| 57.68M | 57.11M | 61.38M | 51.23M | 40.59M | 33.65M | EBITDA |
| 78.58M | 82.27M | 82.20M | 74.47M | 55.62M | 47.93M | Net Income Common Stockholders |
| 34.74M | 37.03M | 40.47M | 29.77M | 25.19M | 20.27M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 113.92M | 106.69M | 86.97M | 94.82M | 89.65M | 95.51M | Total Assets |
| 362.33M | 522.41M | 510.97M | 492.05M | 443.32M | 407.48M | Total Debt |
| 28.05M | 108.72M | 79.79M | 62.10M | 49.40M | 37.57M | Net Debt |
| -59.08M | 2.77M | -3.27M | -25.99M | -38.72M | -44.34M | Total Liabilities |
| 86.72M | 231.46M | 205.70M | 185.94M | 149.34M | 120.86M | Stockholders Equity |
| 243.96M | 265.98M | 263.65M | 265.25M | 260.43M | 247.84M |
| Cash Flow | Free Cash Flow | ||||
| 47.18M | 64.19M | 41.86M | 35.86M | 46.22M | 40.43M | Operating Cash Flow |
| 51.92M | 68.99M | 49.52M | 40.49M | 52.30M | 45.95M | Investing Cash Flow |
| -17.39M | -27.62M | -27.34M | -18.45M | -9.60M | -15.44M | Financing Cash Flow |
| -43.27M | -17.29M | -18.35M | -21.29M | -39.65M | -36.98M |
Magic Technical Analysis
Positive
13.99
Price Trends
12.54
Positive
11.95
Positive
11.25
Positive
Market Momentum
0.10
Negative
68.43
Neutral
89.69
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MGIC, the sentiment is Positive. The current price of 13.99 is above the 20-day moving average (MA) of 12.66, above the 50-day MA of 12.54, and above the 200-day MA of 11.25, indicating a bullish trend. The MACD of 0.10 indicates Negative momentum. The RSI at 68.43 is Neutral, neither overbought nor oversold. The STOCH value of 89.69 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MGIC.
Magic Risk Analysis
Magic disclosed 47 risk factors in its most recent earnings report. Magic reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Magic Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $657.44M | 17.82 | 13.58% | 3.29% | -3.80% | -9.03% | |
68 Neutral | $15.28B | ― | -1.24% | ― | 7.32% | 88.51% | |
66 Neutral | $1.55B | ― | -47.76% | ― | 6.78% | 14.25% | |
65 Neutral | $2.11B | 19.10 | 85.07% | ― | -4.53% | 93.29% | |
58 Neutral | $21.35B | 9.96 | -19.72% | 2.38% | 5.03% | -22.83% | |
50 Neutral | $67.28B | ― | -11.44% | ― | -6.61% | -254.90% |
* Technology Sector Average
Performance Comparison
MGIC
Magic
13.99
2.65
23.37%
MSTR
Strategy
262.55
94.87
56.58%
TDC
Teradata
22.28
-15.47
-40.98%
TWLO
Twilio
102.81
41.92
68.85%
ZUO
Zuora
10.02
1.18
13.35%
Magic Earnings Call Summary
Earnings Call Date: Mar 11, 2025 | % Change Since: 8.87% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
The earnings call reflects a generally positive outlook due to significant revenue growth, a strategic merger, and strong performance in cloud services. However, there were some areas of concern, such as stagnant organic growth in North America and a decrease in net income. Despite these, the merger with Matrix I.T. is expected to create substantial value and enhance future growth prospects.Highlights
Revenue Growth in Q4 2024
Revenue in the fourth quarter of 2024 increased to $142.6 million, up approximately 13.6% from the fourth quarter of 2023, driven by strong demand for cloud, DevOps, and AI services.
Successful Merger Announcement
Magic Software announced a merger with Matrix I.T., which will create a combined entity expected to generate over $2 billion in annual revenues, providing a 13% premium on Magic's share price prior to the announcement.
Cloud Services Growth
Revenues from cloud services increased by 45% year-over-year in 2024, with over 400 satisfied customers across various industries.
Debt Reduction
Total financial debt decreased from $82 million to $59 million by the end of 2024.
Cash Flow Improvement
Cash flow from operating activities for the year ended in 2024 was $74.7 million, compared to $69 million in the same period last year.
Lowlights
Decline in North American Revenue Excluding Acquisitions
Excluding Theoris, revenues in North America remained stable, indicating a lack of growth in organic operations in the region.
Decrease in Non-GAAP Net Income
Non-GAAP net income for the fourth quarter decreased by 0.5% to $11.5 million, and for the year, it decreased by 5.7% to $45.7 million.
Slight Decrease in Gross Margin
Non-GAAP gross margin for the year decreased by 20 basis points from 29.6% to 29.4%.
Company Guidance
During the Magic Software Enterprises 2024 Fourth Quarter and Full Year Financial Results Conference Call, significant guidance was provided, including the announcement of a merger with Matrix I.T., projected to create a combined market capitalization of $2.3 billion. The merger anticipates generating over $2 billion in annual revenues, with a gross profit of $382 million and an operating income of $183 million, reflecting a 9% operating margin. The EBITDA is expected to reach $217 million, yielding a margin of over 10%, while net income attributable to non-controlling interest is projected at $110.6 million with a 5.4% net margin. For 2025, Magic forecasts revenues between $593 million and $603 million, indicating a growth rate of 7.3% to 9.1%. The company also highlighted a 45% year-over-year increase in cloud services revenue and maintained a strong cash position with $112.8 million in cash and cash equivalents. The merger strategy emphasizes leveraging cross-selling opportunities and enhancing geographic reach, particularly in the US and Israeli markets.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.