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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on MGIC

MGIC Investment Corporation's recent performance was driven by solid Q3 results, with EPS growth despite a revenue decline, supported by share repurchases and strong legacy policy performance. The company's disciplined capital management, including substantial share buybacks, has driven EPS growth. A quarterly dividend of $0.15 per share was declared, showcasing its commitment to returning capital to shareholders. Institutional investors, such as Chicago Partners Investment Group LLC and Ethic Inc., have taken new positions in the company, citing its undervalued stock price and low investor attention.

1.c. Company Highlights

2. Magic Software Enterprise's Q2 2025 Earnings: A Strong Performance

Magic Software Enterprise reported a record revenue of $151.6 million for the second quarter of 2025, representing an 11.3% increase year-over-year and 2.8% sequential growth. The company's gross margin was 28.7% for the quarter, down slightly from 29.4% in the same period last year due to a shift in revenue mix and timing of software license renewals. Non-GAAP net income attributable to shareholders increased by 8.7% to $12.7 million, or $0.26 per diluted share, beating analyst estimates of $0.24.

Publication Date: Sep -04

📋 Highlights
  • Record Revenue:: Q2 2025 revenue reached $151.6 million, up 11.3% YoY and 2.8% sequentially.
  • Regional Growth:: Israel grew 18.8% YoY driven by cloud/AI demand and defense; North America rose 6.5% YoY.
  • Gross Margin Decline:: Dropped to 28.7% from 29.4% YoY due to revenue mix and software license renewal timing.
  • Non-GAAP Earnings:: Increased to $12.7 million ($0.26/share), up 8.7% YoY.
  • Full-Year Guidance Raised:: $600–610 million (8.6–10.4% growth) due to cloud/AI demand and strong project pipeline.

Regional Performance

Israel led the growth with an 18.8% increase year-over-year, driven by strong demand for cloud, DevOps, and AI services, as well as the defense sector. North American operations also performed well, with 6.5% year-over-year growth. The company's substantial pipeline of projects, driven by strong customer demand for cloud and AI solutions, has led to an increase in full-year 2025 revenue guidance to a range of $600 million to $610 million.

Guidance and Merger Update

The company raised its full-year 2025 revenue guidance, representing growth of 8.6% to 10.4% compared to the prior fiscal year. Additionally, Magic announced its plan to merge with Matrix, a strategic move that will create a more diversified and resilient global IT service provider, expected to close in the fourth quarter of 2025.

Valuation and Growth Prospects

With a P/E Ratio of 24.77 and an EV/EBITDA of 11.36, the market is pricing in a certain level of growth. Analysts estimate next year's revenue growth at 6.5%. The company's ROIC of 12.28% and ROE of 13.98% indicate a strong return on investment. The proposed merger with Matrix is expected to further enhance the company's growth prospects.

3. NewsRoom

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Magic Software Enterprises (NASDAQ:MGIC) Stock Price Passes Above Two Hundred Day Moving Average – Here’s Why

Nov -29

Source: defenseworld.net

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MGIC Investment Trades Near 52-Week High: Time to Hold the Stock?

Nov -27

Source: zacks.com

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Magic Software (MGIC) Q3 Earnings Lag Estimates

Nov -18

Source: zacks.com

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Magic Software Reports Third quarter 2025 Financial Results with Record-Braking Revenues of $161.7$ million – a 13.1% Year Over Year Increase

Nov -18

Source: globenewswire.com

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MGIC: Buy The Tortoise Instead Of The Hare

Nov -10

Source: seekingalpha.com

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Bessemer Group Inc. Sells 37,979 Shares of MGIC Investment Corporation $MTG

Nov -05

Source: defenseworld.net

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Ethic Inc. Takes Position in MGIC Investment Corporation $MTG

Oct -31

Source: defenseworld.net

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Solid Q3 Validates MGIC As A Suitable Hold

Oct -30

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.35%)

6. Segments

Information Technologies Professional Services

Expected Growth: 4%

Magic Software Enterprises Ltd.'s Information Technologies Professional Services segment growth is driven by increasing demand for digital transformation, cloud adoption, and cybersecurity services. The company's expertise in integration, IoT, and AI solutions also contributes to its growth. Additionally, the rising need for IT consulting and implementation services, particularly among SMBs, fuels the segment's expansion.

Software Services

Expected Growth: 6%

Magic Software Enterprises Ltd.'s 6% growth in Software Services is driven by increasing demand for digital transformation, adoption of cloud-based solutions, and growing need for integration and API management. Additionally, the company's focus on innovation, customer-centric approach, and strategic partnerships contribute to its growth momentum.

7. Detailed Products

Magic xpi Integration Platform

A code-free, metadata-driven integration platform that enables users to integrate disparate systems, applications, and data sources.

Magic xpa Application Platform

A low-code, metadata-driven application development platform that enables users to build, deploy, and maintain business applications.

Magic AppBuilder

A low-code, visual development environment that enables users to build, deploy, and maintain mobile and web applications.

Magic Endpoint

A cloud-based API management platform that enables users to manage, secure, and analyze APIs.

Magic EDI

An electronic data interchange (EDI) solution that enables users to exchange business documents electronically.

8. Magic Software Enterprises Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Magic Software Enterprises Ltd. is medium, as there are some alternative software solutions available in the market, but they are not highly attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers for Magic Software Enterprises Ltd. is low, as customers have limited options and the company has a strong brand presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Magic Software Enterprises Ltd. is medium, as the company relies on a few key suppliers, but they do not have a high level of bargaining power.

Threat Of New Entrants

The threat of new entrants for Magic Software Enterprises Ltd. is high, as the software industry is highly competitive and new companies can easily enter the market.

Intensity Of Rivalry

The intensity of rivalry for Magic Software Enterprises Ltd. is high, as the company operates in a highly competitive market with many established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 23.98%
Debt Cost 9.55%
Equity Weight 76.02%
Equity Cost 9.55%
WACC 9.55%
Leverage 31.54%

11. Quality Control: Magic Software Enterprises Ltd. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Magic Software

A-Score: 6.2/10

Value: 3.5

Growth: 6.7

Quality: 6.7

Yield: 7.5

Momentum: 9.5

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
All for One

A-Score: 5.2/10

Value: 7.8

Growth: 6.3

Quality: 4.6

Yield: 6.2

Momentum: 3.0

Volatility: 3.3

1-Year Total Return ->

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Cancom

A-Score: 5.0/10

Value: 5.9

Growth: 5.8

Quality: 4.3

Yield: 6.9

Momentum: 4.0

Volatility: 3.0

1-Year Total Return ->

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Global Dominion Access

A-Score: 4.9/10

Value: 5.8

Growth: 3.1

Quality: 2.6

Yield: 4.4

Momentum: 7.0

Volatility: 6.7

1-Year Total Return ->

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Sonaecom

A-Score: 4.2/10

Value: 5.8

Growth: 1.0

Quality: 2.4

Yield: 5.0

Momentum: 8.5

Volatility: 2.7

1-Year Total Return ->

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Comarch

A-Score: 3.9/10

Value: 3.4

Growth: 3.1

Quality: 4.2

Yield: 1.9

Momentum: 5.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

25.25$

Current Price

25.25$

Potential

-0.00%

Expected Cash-Flows