Progress Software (NASDAQ:PRGS) & Magic Software Enterprises (NASDAQ:MGIC) Critical Contrast

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

Profitability

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

Net Margins Return on Equity Return on Assets
Magic Software Enterprises 6.74% 10.43% 6.87%
Progress Software 13.30% 30.71% 14.02%

Analyst Ratings

This is a summary of current recommendations and price targets for Magic Software Enterprises and Progress Software, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Magic Software Enterprises 0 0 1 0 3.00
Progress Software 0 0 3 0 3.00

Magic Software Enterprises presently has a consensus price target of $10.00, suggesting a potential upside of 7.53%. Progress Software has a consensus price target of $50.33, suggesting a potential upside of 26.09%. Given Progress Software’s higher probable upside, analysts clearly believe Progress Software is more favorable than Magic Software Enterprises.

Dividends

Magic Software Enterprises pays an annual dividend of $0.31 per share and has a dividend yield of 3.3%. Progress Software pays an annual dividend of $0.62 per share and has a dividend yield of 1.6%. Magic Software Enterprises pays out 56.4% of its earnings in the form of a dividend. Progress Software pays out 29.1% 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. Progress Software has raised its dividend for 2 consecutive years.

Volatility & Risk

Magic Software Enterprises has a beta of 0.92, suggesting that its stock price is 8% less volatile than the S&P 500. Comparatively, Progress Software has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500.

Insider & Institutional Ownership

16.1% of Magic Software Enterprises shares are held by institutional investors. Comparatively, 92.7% of Progress Software shares are held by institutional investors. 4.5% of Magic Software Enterprises shares are held by company insiders. Comparatively, 1.7% of Progress Software shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Magic Software Enterprises and Progress Software’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Magic Software Enterprises $284.38 million 1.60 $19.88 million $0.55 16.91
Progress Software $397.17 million 4.50 $63.49 million $2.13 18.74

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

Summary

Progress Software beats Magic Software Enterprises on 13 of the 16 factors compared between the two stocks.

Magic Software Enterprises Company Profile

Magic Software Enterprises Ltd. provides proprietary application development, business process integration, vertical software solutions, and IT outsourcing software services in Israel and internationally. The company's Software Services segment develops, markets, sells, and supports a proprietary and none proprietary 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, and communications services and solutions, as well as supplemental outsourcing services. The company offers Magic xpa, a proprietary application platform for developing and deploying business applications; AppBuilder, a proprietary application platform for building, deploying, and maintaining high-end and mainframe-grade business applications; Magic xpi integration platform, a graphical wizard-based code-free solution; and Magic xpc, a hybrid integration platform as a service. It also provides vertical software solutions comprising Clicks, a software solution for healthcare providers; Leap, a software solution for business support systems; Hermes Solution, a packaged software solution for managing air cargo ground handling; HR Pulse, a customized single-tenant software as a service tool; and MBS Solution, a proprietary system for managing TV broadcast channels. In addition, the company provides software maintenance, support, training, and consulting services. It serves oil and gas, telecommunications, financial, healthcare, and industrial sectors, as well as public institutions and international agencies. 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 founded in 1983 and is headquartered in Or Yehuda, Israel.

Progress Software Company Profile

Progress Software Corporation develops business applications worldwide. The company operates in three segments: OpenEdge, Data Connectivity and Integration, and Application Development and Deployment. The OpenEdge segment offers Progress OpenEdge, a development software, which builds multi-language applications for secure deployment across various platforms and devices, as well as cloud; Progress Corticon, a business rules management system that enables applications with decision automation and change process, and decision-related insight capabilities; Progress Kinvey, a platform for building enterprise applications; NativeScript, an open-source application development platform; and DataRPM, a cognitive predictive maintenance solution for industrial IoT. The Data Connectivity and Integration segment provides Progress DataDirect Connect software, which offers data connectivity using industry-standard interfaces to connect applications running on various platforms; and Progress DataDirect Hybrid Data Pipeline, a data access service that provides cloud and on-premises data sources for hybrid cloud applications, such as CRM, data management platforms, and hosted analytics. The Application Development and Deployment segment offers Dev Tools, a cross-platform, user experience design, quality assurance, debugging, and reporting suite; Sitefinity, a Web content management and customer analytics platform; and Test Studio, an application lifecycle management suite for testing Web, mobile, and desktop applications. The company also provides project management, implementation, custom development, programming, and other services, as well as services to Web-enable applications; and training services. It sells its products directly to end users, as well as indirectly to application partners, original equipment manufacturers, and system integrators. Progress Software Corporation was founded in 1981 and is headquartered in Bedford, Massachusetts.

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