Critical Analysis: Magic Software Enterprises (NASDAQ:MGIC) and Trend Micro (OTCMKTS:TMICY)

Magic Software Enterprises (NASDAQ:MGIC) and Trend Micro (OTCMKTS:TMICY) are both computer and technology companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, profitability, dividends and analyst recommendations.

Insider & Institutional Ownership

24.7% of Magic Software Enterprises shares are owned by institutional investors. Comparatively, 0.1% of Trend Micro shares are owned by institutional investors. 4.5% of Magic Software Enterprises shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Magic Software Enterprises pays an annual dividend of $0.60 per share and has a dividend yield of 3.5%. Trend Micro pays an annual dividend of $1.80 per share and has a dividend yield of 4.4%. Magic Software Enterprises pays out 74.1% of its earnings in the form of a dividend. Trend Micro pays out 95.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Magic Software Enterprises has increased its dividend for 1 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Magic Software Enterprises and Trend Micro, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Magic Software Enterprises	0	2	1	0	2.33
Trend Micro	0	0	0	0	0.00

Magic Software Enterprises currently has a consensus target price of $18.00, indicating a potential upside of 3.57%. Given Magic Software Enterprises’ stronger consensus rating and higher probable upside, research analysts clearly believe Magic Software Enterprises is more favorable than Trend Micro.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Magic Software Enterprises	6.61%	16.28%	8.96%
Trend Micro	13.23%	29.39%	9.20%

Risk and Volatility

Magic Software Enterprises has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500. Comparatively, Trend Micro has a beta of 0.8, meaning that its stock price is 20% less volatile than the S&P 500.

Valuation and Earnings

This table compares Magic Software Enterprises and Trend Micro”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Magic Software Enterprises	$603.22 million	1.41	$36.88 million	$0.81	21.46
Trend Micro	$1.85 billion	2.91	$231.30 million	$1.88	21.84

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

Summary

Trend Micro beats Magic Software Enterprises on 10 of the 17 factors compared between the two stocks.

About Magic Software Enterprises

Magic Software Enterprises Ltd. provides proprietary application development, vertical software solutions, business process integration, information technologies (IT) outsourcing software services, and cloud-based services in Israel and internationally. Its Software Services segment develops, markets, sells, and supports application platform, software applications, and business and process integration solutions and related services. The company’s 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. It also offers proprietary application platforms, such as Magic xpa for developing and deploying business applications; AppBuilder for building, deploying, and maintaining business applications; Magic xpi for application integration; Magic xpi cloud native; FactoryEye for virtualization of production data; Magic Data Management and Analytics Platform for data management; and Magic SmartUX for cross-platform mobile business applications. The company 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, It 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. The company was incorporated in 1983 and is headquartered in Or Yehuda, Israel.

About Trend Micro

Trend Micro Incorporated develops and sells security-related software for computers and related services in Japan and internationally. The company offers platforms, such as vision one platform, attack surface management, extended detection and response (XDR), cloud security, endpoint security, network security, email security, OT/ICS security, and threat intelligence. It also provides services packages, managed XDR, incident response, and support services. Additionally, the company serves 5G networks, healthcare, manufacturing, oil and gas, electric utility, and automotive industries. The company was incorporated in 1965 and is headquartered in Tokyo, Japan.