RealNetworks (NASDAQ: RNWK) and Magic Software Enterprises (NASDAQ:MGIC) are both large-cap computer and technology companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, valuation, dividends, earnings, institutional ownership, analyst recommendations and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
RealNetworks -21.67% -32.02% -21.45%
Magic Software Enterprises 5.08% 10.49% 6.58%

Dividends

Magic Software Enterprises pays an annual dividend of $0.26 per share and has a dividend yield of 3.0%. RealNetworks 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.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for RealNetworks and Magic Software Enterprises, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RealNetworks 0 0 1 0 3.00
Magic Software Enterprises 0 0 4 0 3.00

RealNetworks currently has a consensus price target of $6.50, suggesting a potential upside of 37.71%. Magic Software Enterprises has a consensus price target of $10.00, suggesting a potential upside of 14.29%. Given RealNetworks’ higher possible upside, research analysts plainly believe RealNetworks is more favorable than Magic Software Enterprises.

Risk & Volatility

RealNetworks has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500. Comparatively, Magic Software Enterprises has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500.

Earnings & Valuation

This table compares RealNetworks and Magic Software Enterprises’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
RealNetworks $120.47 million 1.46 -$36.55 million ($0.73) -6.47
Magic Software Enterprises $201.65 million 1.93 $11.90 million $0.27 32.41

Magic Software Enterprises has higher revenue and earnings than RealNetworks. RealNetworks 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.

Institutional and Insider Ownership

51.7% of RealNetworks shares are owned by institutional investors. Comparatively, 9.0% of Magic Software Enterprises shares are owned by institutional investors. 37.9% of RealNetworks shares are owned by company insiders. Comparatively, 4.5% of Magic Software Enterprises shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Magic Software Enterprises beats RealNetworks on 10 of the 14 factors compared between the two stocks.

About RealNetworks

RealNetworks, Inc. creates applications and services that enable to connect with digital media. The Company connects consumers with their digital media directly and through partners, focusing on supporting various network, devices, media types and social networks. It operates through three segments: Consumer Media, Mobile Services and Games. Within its Consumer Media business, its RealPlayer media player software includes features and services that enable consumers to discover, play, download, manage and edit digital video, stream audio and video, download and save photos and videos from the Web, transfer and share content on social networks, and edit their own photo and video content. The Mobile Services segment consists of digital media services it provides to mobile and online service providers as software as a service offerings. It develops, publishes, licenses and distributes casual games.

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.

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