Reviewing Cadence Design Systems (NASDAQ:CDNS) and Magic Software Enterprises (NASDAQ:MGIC)

Cadence Design Systems (NASDAQ:CDNS) and Magic Software Enterprises (NASDAQ:MGIC) are both computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, earnings, profitability, analyst recommendations, risk and institutional ownership.

Analyst Recommendations

This is a summary of recent ratings and price targets for Cadence Design Systems and Magic Software Enterprises, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cadence Design Systems	0	4	15	0	2.79
Magic Software Enterprises	0	3	1	0	2.25

Cadence Design Systems currently has a consensus price target of $379.11, indicating a potential upside of 12.32%. Magic Software Enterprises has a consensus price target of $18.00, indicating a potential downside of 28.43%. Given Cadence Design Systems’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Cadence Design Systems is more favorable than Magic Software Enterprises.

Risk & Volatility

Cadence Design Systems has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500.

Insider and Institutional Ownership

84.9% of Cadence Design Systems shares are held by institutional investors. Comparatively, 24.7% of Magic Software Enterprises shares are held by institutional investors. 2.0% of Cadence Design Systems shares are held by company insiders. Comparatively, 4.5% of Magic Software Enterprises shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Cadence Design Systems and Magic Software Enterprises’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cadence Design Systems	20.35%	30.13%	15.97%
Magic Software Enterprises	6.61%	16.28%	8.96%

Earnings & Valuation

This table compares Cadence Design Systems and Magic Software Enterprises”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cadence Design Systems	$4.64 billion	19.80	$1.06 billion	$3.88	86.99
Magic Software Enterprises	$552.52 million	2.23	$36.88 million	$0.81	31.05

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

Summary

Cadence Design Systems beats Magic Software Enterprises on 13 of the 14 factors compared between the two stocks.

About Cadence Design Systems

Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Xcelium, a parallel logic simulation platform; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification. The company also provides digital IC design and sign off products, including Genus synthesis and Joules RTL power solutions, as well as Modus DFT software solution to reduce systems-on-chip design-for-test time; physical implementation tools, such as place and route, optimization, and multiple patterning preparation; and Innovus implementation system, a physical implementation system. In addition, it offers custom IC design and simulation products to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory, and radio frequency designs; and system design and analysis products to develop printed circuit boards and IC packages, as well as to analyze electromagnetic, electro-thermal, and other multi-physics effects. Further, the company provides intellectual property (IP) products comprising pre-verified and customizable functional blocks to integrate into customer's ICs; and verification IP with memory models to emulate and model the expected behavior and interaction of standard industry system interface protocols. Additionally, it offers services related to methodology, education, and hosted design solutions, as well as technical support and maintenance services. The company serves consumer, hyperscale computing, 5G communications, mobile, automotive, aerospace and defense, industrial, and life science industries. Cadence Design Systems, Inc. was incorporated in 1987 and is headquartered in San Jose, California.

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.