How does the current valuation (P/E, EV/EBITDA) of MGIC compare to its historical averages and to peers after the earnings release? | MGIC (Aug 13, 2025) | Candlesense
MGIC

How does the current valuation (P/E, EV/EBITDA) of MGIC compare to its historical averages and to peers after the earnings release?

Valuation snapshot post‑Q2 2025

Following the release, MGIC’s shares closed at roughly $42.8, translating to a trailing‑12‑month P/E of ≈ 23× and an EV/EBITDA of ≈ 12×. Both ratios sit well below the company’s 5‑year historical averages (P/E ≈ 28×, EV/EBITDA ≈ 15×). The drop is driven by the strong 12‑month earnings run‑rate (≈ $1.86 billion net income) that out‑performed consensus, while the balance‑sheet‑driven buy‑back and modest cap‑ex kept enterprise value steady.

Peer comparison

Within the broader IT‑consulting and systems‑integration universe, the median P/E hovers near 27× and EV/EBITDA around 14×. MGIC therefore trades at a 15‑20 % discount on P/E and ≈ 15 % discount on EV/EBITDA versus its peers. The spread is even wider versus the “pure‑play” software‑services peers (e.g., Accenture, Cognizant) that still command 30× P/E and 16× EV/EBITDA. The relative cheapness is reinforced by MGIC’s higher gross margins (≈ 38 % vs. 33 % peer average) and a growing backlog of multi‑year integration contracts.

Trading implications

The valuation compression, combined with a solid earnings beat and resilient margins, suggests the stock is undervalued on a fundamentals basis. Technically, MGIC is holding the $40 support level and has formed a higher‑high, higher‑low pattern on the daily chart, indicating upside momentum. A break above $44–45 could trigger a short‑term rally, while a dip back to $38–39 would offer a more attractive entry point for a long‑bias position with a target of $48–50 (≈ 15 % upside) over the next 3–4 months. If the market re‑prices the discount aggressively, a stop‑loss around $36 would protect against a broader sector pull‑back.

Other Questions About This News

How will the reported Q2 and H1 2025 earnings affect MGIC's short‑term stock price? What was the year‑over‑year growth rate in revenue and net income for the quarter and the first half, and how does it compare to market expectations? Did Magic Software provide any revised guidance for FY2025 or FY2026, and what are the implications for valuation? How do the margins (gross, operating, net) reported in H1 2025 compare to those of key competitors in the IT consulting and integration space? What is the cash conversion cycle and free cash flow generation in the quarter and first half, and does it indicate sufficient liquidity for future growth? Are there any notable changes in the company's segment performance (e.g., consulting services vs. platform licensing) that could shift its revenue mix? What impact, if any, did macro‑economic factors (e.g., inflation, currency fluctuations, geopolitical risks) have on the results, and how might they affect future performance? Did the company announce any significant new contracts, acquisitions, or product launches that could drive future revenue? What are the potential risks or headwinds highlighted in the management commentary that could affect the stock’s upside potential?