Magic (MGIC) AI Stock Analysis

• Market Cap: $1.22B
• Dividend Yield: 4.06%
• Average Volume (3M): 35.34K
• Price to Earnings (P/E): 31.8
• Beta (1Y): 0.68
• Revenue Growth: 11.98%
• EPS Growth: 14.91%
• Country: US
• Employees: 3,628
• Sector: Technology
• Sector Strength: 88
• Industry: Information Technology Services
• EPS (TTM): 0.25
• Shares Outstanding: 49,099,304
• 10 Day Avg. Volume: 38,210
• 30 Day Avg. Volume: 35,342
• PEG Ratio: 0.00
• Price to Book (P/B): 2.13
• Price to Sales (P/S): 1.07
• P/FCF Ratio: 8.09
• Enterprise Value/Market Cap: 0.00
• Enterprise Value/Revenue: 0.00
• Enterprise Value/Gross Profit: 0.00
• Enterprise Value/Ebitda: 0.00
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: Hold
• Number of Analyst Covering: 1
• EPS Forecast (FY): 1.03
• Revenue Forecast (FY): $605.10M

• Rating: 78 Outperform
• Price Target: $28.00 ▲(23.51% Upside)

Magic's strong financial performance and positive earnings call are the most significant factors driving the score. The bullish technical indicators further support the positive outlook, while the high P/E ratio slightly tempers the overall score.

Positive Factors

Revenue Growth

Consistent revenue growth reflects strong market demand and effective business strategies, enhancing long-term financial stability.

High AI Project Success Rate

A high success rate in AI projects underscores Magic's technological edge and capability to deliver superior solutions, bolstering competitive advantage.

Merger with Matrix IT

The merger with Matrix IT is expected to enhance Magic's market position and operational capabilities, aligning resources for strategic growth.

Negative Factors

Decrease in Gross Margin

A decline in gross margin may indicate rising costs or pricing pressures, potentially affecting profitability if not addressed.

Reduced Cash Flow from Operations

Reduced cash flow from operations can limit financial flexibility and investment capacity, impacting long-term growth potential.

Increase in Financial Debt

Rising financial debt may lead to higher interest expenses and reduce financial flexibility, posing risks to future cash flow management.

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 multiple key streams. Primarily, the company earns money from subscription fees for its software services, where businesses pay a recurring fee to access its suite of digital tools and analytics. Additionally, Magic monetizes through performance-based marketing services, charging clients based on the effectiveness of campaigns run through its platform. The company may also engage in partnerships with other tech firms and marketing agencies, providing integrated solutions that enhance its product offerings and expand its customer base. Furthermore, any strategic alliances with larger organizations can lead to increased visibility and additional revenue opportunities, contributing positively to Magic's financial performance.

Magic Financial Statement Overview

Summary

Magic demonstrates strong financial health with consistent revenue growth, solid profitability, and effective cash flow management. The company maintains a balanced leverage position, though slight pressures on margins and cash conversion efficiency are areas to monitor.

Income Statement

Magic has demonstrated consistent revenue growth, with a TTM revenue growth rate of 3.2%. The company maintains healthy margins, with a gross profit margin of 28.2% and a net profit margin of 6.6% in the TTM. While these figures indicate stability and profitability, the slight decline in gross profit margin compared to previous years suggests potential cost pressures.

Balance Sheet

The balance sheet shows a moderate debt-to-equity ratio of 0.35, indicating manageable leverage. The return on equity is strong at 13.98%, reflecting efficient use of equity to generate profits. However, the equity ratio of 49.3% suggests a balanced but slightly leveraged capital structure.

Cash Flow

Magic's cash flow is robust, with a significant free cash flow growth rate of 22.9% in the TTM. The free cash flow to net income ratio of 0.93 indicates strong cash generation relative to profits. However, the operating cash flow to net income ratio of 0.33 suggests room for improvement in converting income into cash.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	603.22M	552.52M	535.05M	566.79M	480.32M	371.19M
Gross Profit	169.17M	157.18M	152.99M	155.35M	132.99M	109.59M
EBITDA	86.68M	82.06M	82.27M	82.20M	74.47M	55.62M
Net Income	40.05M	36.88M	37.03M	40.47M	29.77M	25.19M
Balance Sheet
Total Assets	559.81M	540.33M	522.41M	510.97M	492.05M	443.32M
Cash, Cash Equivalents and Short-Term Investments	103.31M	120.40M	106.69M	86.97M	94.82M	89.65M
Total Debt	95.89M	86.15M	108.72M	79.79M	62.10M	49.40M
Total Liabilities	258.98M	239.26M	231.46M	205.70M	185.94M	149.34M
Stockholders Equity	276.04M	277.19M	265.98M	263.65M	265.25M	260.43M
Cash Flow
Free Cash Flow	64.49M	73.30M	67.37M	52.23M	42.23M	49.52M
Operating Cash Flow	66.34M	74.83M	68.99M	56.62M	43.67M	52.30M
Investing Cash Flow	-8.87M	-22.61M	-27.62M	-34.46M	-22.20M	-9.60M
Financing Cash Flow	-59.60M	-45.15M	-17.29M	-18.28M	-21.27M	-39.65M

Magic Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 22.67
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

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 22.67 is below the 20-day moving average (MA) of 22.73, above the 50-day MA of 21.22, and above the 200-day MA of 17.54, indicating a bullish trend. The MACD of 0.63 indicates Negative momentum. The RSI at 65.52 is Neutral, neither overbought nor oversold. The STOCH value of 57.28 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MGIC.

Magic Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MGIC	78 Outperform	$1.22B	31.81	14.04%	4.06%	11.98%	14.91%
CTLP	74 Outperform	$776.77M	13.22	27.08%	―	12.94%	356.32%
GDYN	69 Neutral	$741.20M	53.98	2.96%	―	23.63%	427.13%
FLYW	69 Neutral	$1.68B	―	-0.29%	―	22.71%	-111.24%
HCKT	64 Neutral	$485.84M	29.49	10.27%	2.48%	0.68%	-67.84%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
PSFE	47 Neutral	$467.24M	―	-15.59%	―	-0.95%	-456.64%

Magic Corporate Events

Magic Software Achieves Record Q3 2025 Financial Results

Magic Software Enterprises Ltd. reported record-breaking financial results for the third quarter and nine months ending September 30, 2025, with revenues reaching $161.7 million for the quarter, a 13.1% increase from the previous year. The company’s operating income also saw significant growth, with a 13.6% increase to $17.1 million, highlighting strong performance in both Israeli and North American markets.

Magic Software to Announce Q3 2025 Financial Results Amid Merger Plans

Magic Software Enterprises announced that it will release its financial results for the third quarter of 2025 on November 18. The company, which recently entered into a definitive merger agreement with Matrix IT Ltd., will forgo its Q3 2025 earnings call. This decision marks a significant step in Magic Software’s operational strategy, potentially impacting its market positioning and stakeholder interests.

Magic Software Announces Merger with Matrix IT

On November 3, 2025, Magic Software Enterprises Ltd. entered into a definitive merger agreement with Matrix IT Ltd., an Israeli public IT company, and its subsidiary, Magitrix Ltd. Under the agreement, Magic will become a wholly-owned subsidiary of Matrix, with Magic’s shareholders receiving Matrix ordinary shares, resulting in Magic shareholders holding 31.125% of Matrix’s shares post-merger. This merger, facilitated by a special committee, aims to maximize economic value for Magic’s shareholders and is subject to shareholder approval and other customary conditions. The merger is expected to enhance Magic’s market position and operational capabilities by aligning with Matrix’s resources and strategic direction.