Shareholders of Magic Software Enterprises Ltd. (NASDAQ:MGIC) will be pleased this week, given that the stock price is up 11% to US$9.76 following its latest third-quarter results. It was a pretty mixed result, with revenues beating expectations to hit US$86m. Earnings fell 9.1% short of analyst forecasts, reaching US$0.10 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Magic Software Enterprises's dual analysts is for revenues of US$352.0m in 2020, which would reflect a decent 15% increase on its sales over the past 12 months. Earnings per share are expected to bounce 50% to US$0.55. Yet prior to the latest earnings, analysts had been forecasting revenues of US$328.3m and earnings per share (EPS) of US$0.54 in 2020. So it looks like there's been no major change in sentiment following the latest results, although analysts have made a small increase to to revenue forecasts.
The consensus price target increased 7.3% to US$11.00, with an improved revenue forecast carrying the promise of a more valuable business, in time.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Magic Software Enterprises's past performance and to peers in the same market. Next year brings more of the same, according to analysts, with revenue forecast to grow 15%, in line with its 14% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 12% next year. So although Magic Software Enterprises is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Magic Software Enterprises. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2020, which can be seen for free on our platform here.
We also provide an overview of the Magic Software Enterprises Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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