Magic Software Enterprises (NASDAQ: MGIC) and Amber Road (NYSE:AMBR) are both small-cap technology companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, profitability, institutional ownership, risk, analyst recommendations, earnings and valuation.

Profitability

This table compares Magic Software Enterprises and Amber Road’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Magic Software Enterprises 4.77% 10.37% 6.30%
Amber Road -20.19% -53.22% -14.53%

Insider & Institutional Ownership

9.3% of Magic Software Enterprises shares are owned by institutional investors. Comparatively, 72.6% of Amber Road shares are owned by institutional investors. 4.5% of Magic Software Enterprises shares are owned by company insiders. Comparatively, 13.1% of Amber Road shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Magic Software Enterprises pays an annual dividend of $0.26 per share and has a dividend yield of 3.1%. Amber Road does not pay a dividend. Magic Software Enterprises pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares Magic Software Enterprises and Amber Road’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Magic Software Enterprises $201.65 million 1.86 $11.90 million $0.26 32.50
Amber Road $73.16 million 2.73 -$18.72 million ($0.57) -12.88

Magic Software Enterprises has higher revenue and earnings than Amber Road. Amber Road is trading at a lower price-to-earnings ratio than Magic Software Enterprises, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings for Magic Software Enterprises and Amber Road, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Magic Software Enterprises 0 0 3 0 3.00
Amber Road 0 0 3 0 3.00

Magic Software Enterprises presently has a consensus target price of $10.17, indicating a potential upside of 20.32%. Amber Road has a consensus target price of $12.00, indicating a potential upside of 63.49%. Given Amber Road’s higher possible upside, analysts clearly believe Amber Road is more favorable than Magic Software Enterprises.

Risk and Volatility

Magic Software Enterprises has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500. Comparatively, Amber Road has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500.

Summary

Magic Software Enterprises beats Amber Road on 8 of the 14 factors compared between the two stocks.

Magic Software Enterprises Company Profile

Magic Software Enterprises Ltd. is a provider of application development, business process integration platforms, vertical software solutions and related professional services. The Company is a vendor of information technology (IT) outsourcing services. Its software technology is used by customers to develop, deploy and integrate on premise, mobile and cloud-based business. It operates through two segments: software solutions and IT professional services. The software services segment includes software technology and complementary services. The IT professional services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, and communications services and solutions. Its product portfolio includes Magic xpa Application Platform, AppBuilder Application Platform and Magic xpi Integration Platform. Its vertical software packages include Leap, Hermes Solution, HR Pulse and MBS Solution.

Amber Road Company Profile

Amber Road, Inc. is a provider of cloud-based global trade management (GTM) solutions. The Company’s GTM solutions include modules for logistics contract and rate management, supply chain visibility and event management, international trade compliance, and Global Knowledge trade content database to importers and exporters, non-vessel owning common carriers (resellers), and ocean carriers. The Company delivers its GTM solution using a software-as-a-service (SaaS) model. The Company’s solution automates the global supply chain across sourcing, logistics, cross-border trade and regulatory compliance activities. The Company’s GTM solution combines enterprise-class software, trade content sourced from government agencies and transportation providers in approximately 145 countries, and a global supply chain network connecting its customers with the trading partners, including suppliers, freight forwarders, customs brokers and transportation carriers.

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