Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Magic Software Enterprises Ltd. is a supplier of vertical software solutions, platforms for business process integration, and related professional services. Information technology (IT) outsourcing services are offered by the company.

1.2 The Key Positives, Negatives, and Investment summary

 

1.3 Key Metrics:

The graph below shows that MGIC is more successful than its competitors in the sector at making money throughout every stage of operation. Also, as seen in the graph below, MGIC succeeded in giving its shareholders a higher ROE than its competitors. Lastly, due to efficiency at all operational levels, effective cost management and operational strategies, and record revenue levels, MGIC has beaten its Free Cash Flow number on a YoY basis.

1.4 Top 10 shareholders:

The top 10 shareholders together form ~65.5% of the total shareholding, signifying concentrated shareholding. Formula Systems 1985 Ltd, and Harel Insurance Investments and Financial Services Ltd are the biggest shareholders, holding the maximum stake in the company at ~46.28% and ~5.13%, respectively.

 

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

 2.2 Insights of FY22:

Section 3: Key Risks and Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

Price Performance:

• The stock is leaning toward the lower band of its 52-week range of USD 20.24 and 52-week low price of USD 13.40. Post the announcement of FY22 results the stock has corrected by 8.83%. Currently, the price is near its 52-week low, if the price sustains the 52-week low, there are expectations of a reversal toward the upper directions.
• The price is currently trading below its long-term (200-day) SMA and its short-term (50-day) SMA, with the current RSI of 31.09.
• In the past month the stock has corrected by 03%, while the stock has corrected by 17.23% in the past three months.

4.2 Fundamental Valuation

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 13, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.