Company Overview
Magic Software Enterprises Ltd. operates within the Technology sector, specifically providing proprietary application development, vertical software solutions, business process integration, information technologies outsourcing software services, and cloud-based services worldwide. The company functions across two distinct segments, Software Services and IT Professional, catering to global markets with specialized IT solutions. Its financial scale is defined by a market capitalization of $952.53M and an annual revenue of $603.22M, supported by a workforce of 3,787 employees. These valuation and revenue figures indicate that the entity holds a significant position as a mid-cap technology provider, generating substantial revenue while maintaining a manageable enterprise value relative to its operational scale.
Financial Health
The company reported a revenue of $603.22M for the trailing twelve months, generating a net income of $39.88M and an EBITDA of $76.76M. The substantial gap between the revenue figure and the net income reveals a cost structure where operating expenses, including cost of goods sold and overhead, consume a significant portion of total sales before reaching the bottom line. Free cash flow stands at $70.09M, which indicates that the company generates sufficient cash from its operations to cover capital expenditures and potentially fund dividends or reinvestments without relying heavily on external financing. Three key margin metrics further detail the profitability profile: the gross margin is 28.2%, reflecting the efficiency of production and service delivery relative to direct costs; the operating margin is 10.6%, showing the profitability after covering operating expenses; and the profit margin is 6.6%, which represents the final percentage of revenue converted into net income. On the balance sheet, the company holds $103.31M in cash against $95.89M in debt, resulting in a debt-to-equity ratio of 31.87%, suggesting a balance sheet that is conservatively managed with a slight net cash position rather than being heavily leveraged. Liquidity is supported by a current ratio of 1.48, indicating that the company possesses 1.48 dollars in current assets for every dollar of current liabilities, ensuring adequate short-term solvency. Return metrics highlight management effectiveness with a Return on Equity of 15.6% and a Return on Assets of 7.4%, demonstrating that shareholders are receiving a robust return on their invested capital while the company utilizes its asset base efficiently to generate earnings.
Valuation Assessment
Valuation multiples provide insight into market expectations, with the trailing P/E ratio at 23.66 and a forward P/E of 17.20. The difference between these two figures implies that the market expects earnings growth that would allow the stock to trade at a lower multiple in the future, suggesting an anticipated increase in profitability relative to the current earnings base. The price-to-book ratio is 3.45, which indicates that the market values the company at a significant premium over its book value, likely reflecting the intangible value of its proprietary software and human capital. Alternative valuation metrics include a price-to-sales ratio of 1.58 and an EV/EBITDA of 12.63, which suggest that the company is valued moderately relative to its revenue and earnings before interest, taxes, depreciation, and amortization. Price action over the last year ranges between a 52-week low of $11.65 and a 52-week high of $28.00; without a specific current price to calculate the exact percentage, the range establishes the volatility floor and ceiling within which the stock has traded recently. The stock exhibits a beta of 0.75, meaning it is less volatile than the broader market, typically moving at a smaller magnitude than the overall index during periods of market fluctuation.
Growth & Income
The company has demonstrated positive expansion with revenue growth of 13.1% and earnings growth of 17.6% year over year. The fact that earnings growth exceeds revenue growth implies that the company is improving its operational leverage or cost structure, allowing net income to rise at a faster pace than the top line. As a dividend payer, the company offers a dividend yield of 5.2% with a payout ratio of 104.8%. The payout ratio exceeding 100% indicates that the company is paying out more in dividends than it is currently reporting in net income, which relies on prior retained earnings or non-cash adjustments to fund the distribution. This high payout level suggests a reliance on accumulated cash reserves rather than current earnings to support the dividend, a strategy that must be monitored for sustainability if earnings do not accelerate further. Overall, the company presents a profile of moderate price volatility with strong earnings expansion and a high dividend yield that relies heavily on cash generation and retained earnings to maintain payments.