Magic Software Enterprises Ltd. (NASDAQ:MGIC) shareholders will have a reason to smile today, with the covering analyst making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analyst modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 14% to US$11.97 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following this upgrade, Magic Software Enterprises' lone analyst are forecasting 2024 revenues to be US$540m, approximately in line with the last 12 months. Statutory earnings per share are forecast to be US$0.75, approximately in line with the last 12 months. Previously, the analyst had been modelling revenues of US$474m and earnings per share (EPS) of US$0.61 in 2024. There has definitely been an improvement in perception recently, with the analyst substantially increasing both their earnings and revenue estimates.

With these upgrades, we're not surprised to see that the analyst has lifted their price target 7.7% to US$14.00 per share.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Magic Software Enterprises' revenue growth is expected to slow, with the forecast 0.9% annualised growth rate until the end of 2024 being well below the historical 16% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Magic Software Enterprises.

The Bottom Line

The biggest takeaway for us from these new estimates is that the analyst upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, the analyst also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Magic Software Enterprises.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Magic Software Enterprises going out as far as 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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