Financial Survey: Magic Software Enterprises (NASDAQ:MGIC) versus Open Text (NASDAQ:OTEX)

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

Analyst Ratings

This is a summary of current ratings and target prices for Open Text and Magic Software Enterprises, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Open Text	0	11	3	0	2.21
Magic Software Enterprises	0	2	1	0	2.33

Open Text presently has a consensus price target of $35.33, indicating a potential upside of 50.42%. Magic Software Enterprises has a consensus price target of $18.00, indicating a potential upside of 3.57%. Given Open Text’s higher probable upside, research analysts clearly believe Open Text is more favorable than Magic Software Enterprises.

Earnings & Valuation

This table compares Open Text and Magic Software Enterprises”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Open Text	$5.17 billion	1.10	$435.87 million	$1.70	13.82
Magic Software Enterprises	$603.22 million	1.41	$36.88 million	$0.81	21.46

Open Text has higher revenue and earnings than Magic Software Enterprises. Open Text 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.

Dividends

Open Text pays an annual dividend of $1.10 per share and has a dividend yield of 4.7%. Magic Software Enterprises pays an annual dividend of $0.60 per share and has a dividend yield of 3.5%. Open Text pays out 64.7% of its earnings in the form of a dividend. Magic Software Enterprises pays out 74.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Magic Software Enterprises has raised its dividend for 1 consecutive years. Open Text is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

70.4% of Open Text shares are owned by institutional investors. Comparatively, 24.7% of Magic Software Enterprises shares are owned by institutional investors. 10.6% of Open Text shares are owned by company insiders. Comparatively, 4.5% of Magic Software Enterprises shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Open Text has a beta of 1.08, suggesting that its stock price is 8% more volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500.

Profitability

This table compares Open Text and Magic Software Enterprises’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Open Text	8.42%	23.60%	6.94%
Magic Software Enterprises	6.61%	16.28%	8.96%

Summary

Open Text beats Magic Software Enterprises on 12 of the 17 factors compared between the two stocks.

About Open Text

Open Text Corporation provides information management software and solutions. The company offers content services, which includes content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving; and operates experience cloud platform that provides customer experience and web content management, digital asset management, customer analytics, AI and insights, e-discovery, digital fax, omnichannel communications, secure messaging, and voice of customer, as well as customer journey, testing, and segmentation. It also provides cybersecurity cloud solutions to protect, prevent, detect, respond and quickly recover from threats across endpoints, network, applications, IT infrastructure and data, AI-led threat intelligence; and to protect critical information and processes through threat intelligence, forensics, identity, encryption, and cloud-based application security. In addition, the company offers business network cloud for digital supply chains and secure e-commerce ecosystems including digitize and automate procure-to-pay and order-to-cash processes; IT operations management cloud for automation and advancement of IT support and asset management; and analytics & AI cloud solutions that offers artificial intelligence with practical usage to provide organizations with actionable insights and better automation, such as visualizations, advanced natural language processing and understanding, and integrated computer vision capabilities. In addition, it provides application automation cloud, developers cloud, and services. Further, it has strategic partnerships with SAP SE, Google Cloud, Amazon AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, DXC Technology Company, Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting LLP, Hewlett Packard Enterprises, and Tata Consultancy Services. Open Text Corporation was incorporated in 1991 and is headquartered in Waterloo, Canada.

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.