Financial Analysis: Magic Software Enterprises (NASDAQ:MGIC) versus Smith Micro Software (NASDAQ:SMSI)

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

Volatility & Risk

Smith Micro Software has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Earnings and Valuation

This table compares Smith Micro Software 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
Smith Micro Software	$18.36 million	0.73	-$48.70 million	($1.56)	-0.40
Magic Software Enterprises	$603.22 million	1.89	$36.88 million	$0.81	28.59

Magic Software Enterprises has higher revenue and earnings than Smith Micro Software. Smith Micro Software 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.

Institutional & Insider Ownership

20.8% of Smith Micro Software shares are owned by institutional investors. Comparatively, 24.7% of Magic Software Enterprises shares are owned by institutional investors. 29.8% of Smith Micro Software 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 hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Smith Micro Software and Magic Software Enterprises, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Smith Micro Software	1	0	0	0	1.00
Magic Software Enterprises	0	3	1	0	2.25

Magic Software Enterprises has a consensus price target of $18.00, suggesting a potential downside of 22.28%. Given Magic Software Enterprises’ stronger consensus rating and higher possible upside, analysts clearly believe Magic Software Enterprises is more favorable than Smith Micro Software.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Smith Micro Software	-166.15%	-45.16%	-37.14%
Magic Software Enterprises	6.58%	15.85%	8.89%

Summary

Magic Software Enterprises beats Smith Micro Software on 13 of the 14 factors compared between the two stocks.

About Smith Micro Software

Smith Micro Software, Inc. engages in the development and sale of software to enhance the mobile experience to wireless and cable service providers in the Americas, Europe, the Middle East, and Africa. The company offers SafePath Family, SafePath IoT, SafePath Home, and SafePath Premium product suite, which provides tools to protect digital lifestyles and manage connected devices inside and outside the home; and CommSuite, a messaging platform that helps mobile service provides deliver a next-generation voicemail experience to mobile subscribers, as well as enables multi-language voice-to-text (VTT) transcription messaging. It also offers ViewSpot, a retail display management platform that provides on-screen and interactive demos to wireless carriers and other smartphone retailers; and technical support and customer services. Smith Micro Software, Inc. was founded in 1982 and is headquartered in Pittsburgh, Pennsylvania.

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.