Financial Survey: Coupa Software (COUP) and Magic Software Enterprises (MGIC)

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

Dividends

Magic Software Enterprises pays an annual dividend of $0.26 per share and has a dividend yield of 2.9%. Coupa Software does not pay a dividend. Magic Software Enterprises pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility and Risk

Coupa Software has a beta of 4.39, meaning that its share price is 339% more volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500.

Earnings and Valuation

This table compares Coupa Software and Magic Software Enterprises’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Coupa Software $133.77 million 13.99 -$37.60 million ($0.80) -42.50
Magic Software Enterprises $201.65 million 1.97 $11.90 million $0.26 34.42

Magic Software Enterprises has higher revenue and earnings than Coupa Software. Coupa 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Coupa Software -24.37% -20.40% -12.60%
Magic Software Enterprises 4.77% 10.37% 6.30%

Insider and Institutional Ownership

74.7% of Coupa Software shares are owned by institutional investors. Comparatively, 9.3% of Magic Software Enterprises shares are owned by institutional investors. 32.1% of Coupa 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 endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Coupa Software and Magic Software Enterprises, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Coupa Software 0 3 11 0 2.79
Magic Software Enterprises 0 0 3 0 3.00

Coupa Software currently has a consensus target price of $37.57, suggesting a potential upside of 10.50%. Magic Software Enterprises has a consensus target price of $10.17, suggesting a potential upside of 13.59%. Given Magic Software Enterprises’ stronger consensus rating and higher possible upside, analysts plainly believe Magic Software Enterprises is more favorable than Coupa Software.

Summary

Magic Software Enterprises beats Coupa Software on 10 of the 16 factors compared between the two stocks.

About Coupa Software

Coupa Software Incorporated is a United States-based company, which provides a unified, cloud-based spend management platform that connects organizations with suppliers globally. The Company offers spend management cloud applications, which are pre-integrated. The platform offers consumerized financial applications. Its spend management suite includes procurement, invoicing, expenses, sourcing, inventory, contract lifecycle management, budgeting, analytics, open business network, supplier information management and storefront. The platform offers features, such as procure-to-pay solution; online invoice management, and inventory management and tracking software system. Its solutions for business needs include financial compliance and mobile productivity. The Company’s solutions for enterprise resource planning (ERP) include Oracle and NetSuite. The Company offers solutions for industries, including financial, healthcare, oil and gas, retail, technology, and food and beverage.

About Magic Software Enterprises

Magic Software Enterprises Ltd. is a provider of application development, business process integration platforms, vertical software solutions and related professional services. The Company is a vendor of information technology (IT) outsourcing services. Its software technology is used by customers to develop, deploy and integrate on premise, mobile and cloud-based business. It operates through two segments: software solutions and IT professional services. The software services segment includes software technology and complementary services. The 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. Its product portfolio includes Magic xpa Application Platform, AppBuilder Application Platform and Magic xpi Integration Platform. Its vertical software packages include Leap, Hermes Solution, HR Pulse and MBS Solution.

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