Head to Head Comparison: Electronic Arts (NASDAQ:EA) versus Magic Software Enterprises (NASDAQ:MGIC)

Electronic Arts (NASDAQ:EA – Get Rating) and Magic Software Enterprises (NASDAQ:MGIC – Get Rating) are both consumer discretionary companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, institutional ownership, dividends and profitability.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Electronic Arts	14.08%	14.38%	8.22%
Magic Software Enterprises	7.17%	19.25%	10.18%

Dividends

Electronic Arts pays an annual dividend of $0.76 per share and has a dividend yield of 0.7%. Magic Software Enterprises pays an annual dividend of $0.58 per share and has a dividend yield of 4.5%. Electronic Arts pays out 20.5% of its earnings in the form of a dividend. Magic Software Enterprises pays out 73.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Electronic Arts has increased its dividend for 1 consecutive years and Magic Software Enterprises has increased its dividend for 1 consecutive years.

Insider & Institutional Ownership

89.5% of Electronic Arts shares are held by institutional investors. Comparatively, 18.2% of Magic Software Enterprises shares are held by institutional investors. 0.4% of Electronic Arts shares are held by insiders. Comparatively, 4.5% of Magic Software Enterprises shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Electronic Arts has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500.

Valuation and Earnings

This table compares Electronic Arts and Magic Software Enterprises’ top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Electronic Arts	$6.99 billion	4.48	$789.00 million	$3.71	30.55
Magic Software Enterprises	$566.79 million	1.12	$40.67 million	$0.79	16.34

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

Analyst Ratings

This is a summary of recent recommendations for Electronic Arts and Magic Software Enterprises, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Electronic Arts	0	10	12	0	2.55
Magic Software Enterprises	0	0	0	0	N/A

Electronic Arts currently has a consensus target price of $135.54, suggesting a potential upside of 19.58%. Magic Software Enterprises has a consensus target price of $23.00, suggesting a potential upside of 78.16%. Given Magic Software Enterprises’ higher probable upside, analysts clearly believe Magic Software Enterprises is more favorable than Electronic Arts.

Summary

Electronic Arts beats Magic Software Enterprises on 9 of the 15 factors compared between the two stocks.

About Electronic Arts

(Get Rating)

Electronic Arts, Inc. develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. The company develops and publishes games and services across various genres, such as sports, first-person shooter, action, role-playing, and simulation primarily under the Battlefield, The Sims, Apex Legends, Anthem, Need for Speed, and Plants v. Zombies brands, and license games, including FIFA, Madden NFL, and Star Wars brands. The firm also provides advertising services and licenses its games to third parties to distribute and host its games. It markets and sells its games and services through digital distribution channels, as well as through retail channels, such as mass-market retailers, electronics specialty stores, and game software specialty stores. The company was founded by William M. Hawkins III and William Gordon in 1982 and is headquartered in Redwood City, CA.

About Magic Software Enterprises

(Get Rating)

Magic Software Enterprises Ltd. engages in the provision of proprietary application development and business process integration platforms, vertical software solutions, and vendor of information technology (IT) outsourcing software services. It operates through Software Services and IT Professional Services segments. The Software Services segment includes proprietary and non-proprietary software technology and complementary services. The IT Professional Services segment offers services in the areas of infrastructure design and delivery; application development; technology planning and implementation services; communications services and solutions; and supplemental staffing services. The company was founded by David Assia on February 10, 1983 and is headquartered in Or Yehuda, Israel.