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

Valuation & Earnings

This table compares Gigamon and Magic Software Enterprises’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Gigamon $310.86 million 4.64 $49.43 million ($0.03) -1,287.90
Magic Software Enterprises $201.65 million 1.92 $11.90 million $0.27 32.22

Gigamon has higher revenue and earnings than Magic Software Enterprises. Gigamon 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 3.0%. Gigamon does not pay a dividend. Magic Software Enterprises pays out 96.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

98.3% of Gigamon shares are owned by institutional investors. Comparatively, 9.0% of Magic Software Enterprises shares are owned by institutional investors. 4.5% of Gigamon shares are owned by insiders. Comparatively, 4.5% of Magic Software Enterprises shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Gigamon and Magic Software Enterprises, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gigamon 0 9 1 0 2.10
Magic Software Enterprises 0 0 4 0 3.00

Gigamon currently has a consensus price target of $45.35, suggesting a potential upside of 17.34%. Magic Software Enterprises has a consensus price target of $10.00, suggesting a potential upside of 14.94%. Given Gigamon’s higher probable upside, analysts clearly believe Gigamon is more favorable than Magic Software Enterprises.

Volatility & Risk

Gigamon has a beta of 1.46, meaning that its share price is 46% more volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Gigamon -0.32% -0.55% -0.38%
Magic Software Enterprises 5.08% 10.49% 6.58%

Summary

Gigamon beats Magic Software Enterprises on 8 of the 15 factors compared between the two stocks.

Gigamon Company Profile

Gigamon Inc. offers a solution that delivers visibility and control of data-in-motion traversing enterprise, federal and service provider networks. The Company’s Visibility Platform consists of a distributed system of nodes (that in combination establish a Visibility Fabric). The Visibility Platform includes physical appliances and virtual nodes that can be deployed in data centers, central offices, virtualized/private cloud/public cloud environments, and small form-factor remote site appliances, which in combination enable pervasive visibility of network infrastructures. Its GigaSECURE Security Delivery Platform enables security teams and information technology (IT) personnel to gain visibility into their IT infrastructure by forwarding selected traffic of interest from network, server and remote location infrastructure to security, management, analysis and compliance tools in a manner that is optimized for specific uses or functions.

Magic Software Enterprises Company Profile

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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