Although Magic Software Enterprises Ltd. (NASDAQ:MGIC) may not have the largest market cap, it has seen significant price action over the past few months on the NASDAQGS, rising to highs of $12.87 and falling to lows of $9.63. Some price action can provide investors with a better opportunity to enter the stock and potentially buy at a lower price. One question to answer is, does Magic Software Enterprises’ current trading price of $10.33 reflect the true value of the small-cap? Or is it currently undervalued, giving us a buying opportunity? Let’s take a look at Magic Software Enterprises’ outlook and value based on the latest financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Magic Software Enterprises
What opportunities does Magic Software Enterprises offer?
Great news for investors – Magic Software Enterprises is still trading at a relatively cheap price according to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average. We used the price-to-earnings ratio in this case because there is not enough transparency to predict cash flows. The stock’s ratio of 14.2x is currently well below the industry average of 35.25x, meaning it is trading at a cheaper price compared to its peers. However, there could be another buying opportunity in the future. This is because Magic Software Enterprises’ beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. When the market is down, the company’s shares are likely to fall more than the rest of the market, presenting an excellent buying opportunity.
What kind of growth will Magic Software Enterprises generate?
Investors looking for growth in their portfolio should consider a company’s prospects before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with relatively muted earnings growth of 5.9% for next year, growth does not seem to be a major reason to make a purchase decision for Magic Software Enterprises, at least in the short term.
What this means for you
Are you a shareholder? Although growth is relatively muted, it could be a good time to increase your stock holdings as MGIC is currently trading below the industry P/E. However, there are other factors to consider such as financial health that could explain the current price multiple.
Are you a potential investor? If you have been keeping an eye on MGIC for some time, now could be the right time to buy. Its future earnings prospects are not yet fully reflected in the current share price, which means it is not too late to buy MGIC. However, before making an investment decision, you should consider other factors such as the strength of its balance sheet to make an informed investment decision.
Remember that when analyzing a stock it is important to consider the risks involved. You will be interested to know that we found 1 warning sign for Magic Software Enterprises and you will want to know about it.
If you are no longer interested in Magic Software Enterprises, you can use our free platform to see our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
