Magic (MGIC) AI Stock Analysis

• Market Cap: $980.02M
• Dividend Yield: 2.82%
• Average Volume (3M): 70.43K
• Price to Earnings (P/E): 26.1
• Beta (1Y): 0.72
• Revenue Growth: 8.75%
• EPS Growth: 5.17%
• Country: US
• Employees: 3,628
• Sector: Technology
• Sector Strength: 98
• Industry: Information Technology Services
• EPS (TTM): 0.25
• Shares Outstanding: 49,099,304
• 10 Day Avg. Volume: 47,606
• 30 Day Avg. Volume: 70,430
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 0.65
• Enterprise Value/Revenue: 1.12
• Enterprise Value/Gross Profit: 3.96
• Enterprise Value/Ebitda: 7.62
• 1Y Price Target: $19.25
• Price Target Upside: -3.56% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3

• Rating: 73 Outperform
• Price Target: $22.50 ▲(12.73% Upside)

Magic's overall stock score is supported by strong financial performance and positive earnings call insights, highlighting revenue growth and AI service expansion. However, technical analysis indicates overbought conditions, and the high P/E ratio suggests potential overvaluation, which moderates the overall score.

Positive Factors

Acquisition and Synergies

The acquisition will bolster Magic’s capabilities in digital transformation for the manufacturing sector, especially in SMB and midsize markets.

Revenue Growth

Revenue increased 13.6% year-over-year, driven by continued growth in the Israeli market and stability in the U.S. market.

Negative Factors

Billable Days

Second quarter 2025 will include 4.5 fewer billable days compared to the first quarter, equivalent to a roughly 7% reduction in time and material capacity.

Merger Timeline

The pending merger with Matrix is now expected to close during the fourth quarter of 2025, slightly later than prior expectations.

Magic Business Overview & Revenue Model

Company Description

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. The company's Software Services segment develops, markets, sells, and supports application platform, software applications, and business and process integration solutions and related services. Its IT Professional Services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, and supplemental outsourcing services. The company offers proprietary application platforms, such as Magic xpa for developing and deploying business applications; AppBuilder for building, deploying, and maintaining high-end and mainframe-grade business applications; Magic xpi for application integration; FactoryEye for virtualization of production data; BusinessEye for organizational business intelligence; and Magic SmartUX for cross-platform mobile business applications. It also provides vertical software solutions comprising Clicks, a software solution for healthcare providers; Leap, a software solution for business support systems; Hermes Cargo, a packaged software solution for managing air cargo ground handling; HR Pulse, a single-tenant software as a service tool; MBS Solution, a system for managing TV broadcast management; Nativ, a system for management of rehabilitation centers; and Mobisale, a system for sales and distribution field activities for consumer goods manufacturers and wholesalers. In addition, the company provides software maintenance, support, training, and consulting services. The company was formerly known as Mashov Software Export (1983) Ltd. and changed its name to Magic Software Enterprises Ltd. in 1991. Magic Software Enterprises Ltd. was incorporated in 1983 and is headquartered in Or Yehuda, Israel.

How the Company Makes Money

Magic generates revenue through a combination of subscription fees, transaction-based fees, and professional service contracts. The company offers tiered subscription plans for its software products, allowing businesses to pay for access to various features based on their needs. Additionally, Magic earns revenue from transaction fees when businesses utilize its platforms for mobile marketing campaigns and customer engagement initiatives. Significant partnerships with major brands and technology providers further enhance its revenue streams by facilitating co-marketing opportunities and expanding its customer base.

Magic Financial Statement Overview

Summary

Magic showcases strong financial health with steady revenue growth and profitability, supported by a stable balance sheet and effective cash flow management. The company efficiently utilizes its resources, maintaining a healthy balance between debt and equity, and continues to generate substantial cash flows, positioning it well for future growth.

Income Statement

Magic has demonstrated consistent revenue growth, with a notable increase of 3.01% in the latest TTM period compared to the previous annual report. The company shows strong profitability, with a gross profit margin of 28.3% and a net profit margin of 6.61% for TTM. Both EBIT and EBITDA margins are healthy at 10.99% and 14.72%, respectively, indicating effective cost management and operational efficiency.

Balance Sheet

Magic maintains a stable balance sheet with a debt-to-equity ratio of 0.3, reflecting a balanced approach to leverage. The equity ratio of 50.45% demonstrates a solid financial structure with significant equity backing. Return on equity stands at 13.97%, which is a strong indicator of profitability relative to shareholder investments.

Cash Flow

The company's cash flow is robust, with a strong operating cash flow to net income ratio of 1.64, indicating effective cash generation from operations. Free cash flow remains healthy at $57.56 million, although there is a 21.31% decrease compared to the previous period. However, the free cash flow to net income ratio of 1.53 still highlights solid cash flow management.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	552.52M	535.05M	566.79M	480.32M	371.19M
Gross Profit	157.18M	152.99M	155.35M	132.99M	109.59M
EBITDA	82.06M	82.27M	82.20M	74.47M	55.62M
Net Income	36.88M	37.03M	40.47M	29.77M	25.19M
Balance Sheet
Total Assets	540.33M	522.41M	510.97M	492.05M	443.32M
Cash, Cash Equivalents and Short-Term Investments	112.83M	106.69M	86.97M	94.82M	89.65M
Total Debt	86.15M	108.72M	79.79M	62.10M	49.40M
Total Liabilities	239.26M	231.46M	205.70M	185.94M	149.34M
Stockholders Equity	277.19M	265.98M	263.65M	265.25M	260.43M
Cash Flow
Free Cash Flow	73.16M	64.19M	41.86M	35.86M	46.22M
Operating Cash Flow	74.83M	68.99M	49.52M	40.49M	52.30M
Investing Cash Flow	-22.61M	-27.62M	-27.34M	-18.45M	-9.60M
Financing Cash Flow	-45.15M	-17.29M	-18.35M	-21.27M	-39.65M

Magic Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 19.96
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MGIC, the sentiment is Neutral. The current price of 19.96 is below the 20-day moving average (MA) of 20.84, above the 50-day MA of 19.02, and above the 200-day MA of 14.07, indicating a neutral trend. The MACD of 0.24 indicates Positive momentum. The RSI at 46.44 is Neutral, neither overbought nor oversold. The STOCH value of 20.91 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MGIC.

Magic Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CTLP	83 Outperform	$798.85M	13.72	28.20%	―	12.51%	390.09%
MGIC	73 Outperform	$980.02M	26.09	13.87%	2.82%	8.75%	5.17%
FLYW	71 Outperform	$1.44B	286.86	0.86%	―	22.20%	―
Sector *	68 Neutral	¥238.13B	15.93	6.62%	2.46%	9.00%	-0.33%
GDYN	66 Neutral	$650.27M	37.93	3.69%	―	22.27%	―
HCKT	64 Neutral	$568.92M	34.54	15.27%	2.22%	4.18%	-51.62%
PSFE	56 Neutral	$674.03M	39.11	-0.04%	―	3.50%	95.90%