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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Magic Software Enterprises and CounterPath Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Magic Software Enterprises 0 0 4 0 3.00
CounterPath Corporation 0 0 0 0 N/A

Magic Software Enterprises presently has a consensus target price of $10.17, indicating a potential upside of 20.32%. Given Magic Software Enterprises’ higher possible upside, analysts plainly believe Magic Software Enterprises is more favorable than CounterPath Corporation.

Institutional & Insider Ownership

9.4% of Magic Software Enterprises shares are held by institutional investors. Comparatively, 5.4% of CounterPath Corporation shares are held by institutional investors. 4.5% of Magic Software Enterprises shares are held by company insiders. Comparatively, 38.3% of CounterPath Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Magic Software Enterprises 4.77% 10.37% 6.30%
CounterPath Corporation -30.14% -34.00% -22.56%

Volatility & Risk

Magic Software Enterprises has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, CounterPath Corporation has a beta of -0.69, suggesting that its stock price is 169% less volatile than the S&P 500.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Magic Software Enterprises $201.65 million 1.86 $11.90 million $0.26 32.50
CounterPath Corporation $10.69 million 1.25 -$2.45 million ($0.66) -3.68

Magic Software Enterprises has higher revenue and earnings than CounterPath Corporation. CounterPath Corporation 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.

Dividends

Magic Software Enterprises pays an annual dividend of $0.26 per share and has a dividend yield of 3.1%. CounterPath Corporation 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.

Summary

Magic Software Enterprises beats CounterPath Corporation on 12 of the 14 factors compared between the two stocks.

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.

About CounterPath Corporation

CounterPath Corporation designs, develops and sells software and services that enable enterprises and telecommunication service providers to deliver unified communications (UC) services, including voice, video, messaging and collaboration functionality, over their Internet Protocol (IP)-based networks. The Company’s solutions range from software products to cloud-based services. Its software products include applications for smartphones, tablets and desktop computers, a Software Development Kit (SDK) for software developers seeking to add voice, video and messaging capabilities to their existing applications, and server-based software solutions for configuring, managing and supporting softphones and for deploying messaging and collaboration services. These software products are also available to customers in the form of cloud-based hosted services. The Company is focused on selling its software products to enterprises, telecommunication service providers and channel partners.

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