Comparing ITOCHU Techno-Solutions (OTCMKTS:ITTOY) & Magic Software Enterprises (NASDAQ:MGIC)

ITOCHU Techno-Solutions (OTCMKTS:ITTOY) and Magic Software Enterprises (NASDAQ:MGIC) are both computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, earnings, analyst recommendations, institutional ownership, dividends, valuation and risk.

Profitability

This table compares ITOCHU Techno-Solutions and Magic Software Enterprises’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ITOCHU Techno-Solutions	N/A	N/A	N/A
Magic Software Enterprises	6.41%	15.63%	8.62%

Dividends

ITOCHU Techno-Solutions pays an annual dividend of $53.63 per share and has a dividend yield of 429.0%. Magic Software Enterprises pays an annual dividend of $0.40 per share and has a dividend yield of 3.4%. ITOCHU Techno-Solutions pays out 40.4% of its earnings in the form of a dividend. Magic Software Enterprises pays out 54.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. ITOCHU Techno-Solutions is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares ITOCHU Techno-Solutions and Magic Software Enterprises”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ITOCHU Techno-Solutions	N/A	N/A	N/A	$132.74	0.09
Magic Software Enterprises	$522.00 million	1.11	$37.03 million	$0.73	16.19

Magic Software Enterprises has higher revenue and earnings than ITOCHU Techno-Solutions. ITOCHU Techno-Solutions 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.

Analyst Recommendations

This is a summary of current ratings and target prices for ITOCHU Techno-Solutions and Magic Software Enterprises, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ITOCHU Techno-Solutions	0	0	0	0	N/A
Magic Software Enterprises	0	0	1	0	3.00

Magic Software Enterprises has a consensus target price of $14.00, suggesting a potential upside of 18.44%. Given Magic Software Enterprises’ higher probable upside, analysts plainly believe Magic Software Enterprises is more favorable than ITOCHU Techno-Solutions.

Institutional & Insider Ownership

0.0% of ITOCHU Techno-Solutions shares are owned by institutional investors. Comparatively, 24.7% of Magic Software Enterprises shares are owned by institutional investors. 4.5% of Magic Software Enterprises shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Magic Software Enterprises beats ITOCHU Techno-Solutions on 9 of the 12 factors compared between the two stocks.

About ITOCHU Techno-Solutions

ITOCHU Techno-Solutions Corporation engages in the sale, maintenance, and support of computers and network systems, software development, information processing, and support services in Japan, Asia, and internationally. It engages in the provision of information services-related to science and engineering; maintenance, operation, and monitoring services; system and network support, system construction, and IT-related training services; IT systems operation and management, infrastructure operation and management, business and application operation and management, and satellite communications and broadcasting operation services; sale of network and security-related equipment, storage-related devices, software and other peripheral devices, etc.; provision of related consulting, and deployment/building and support services, as well as building facility operation and management activities for computer centers; and provision of helpdesk and contact center operation services, IT education and training services, creation of instructional manuals, and outbound services and back-office services. The company also engages in the provision of IT infrastructure building, maintenance, and operation services; exportation of IT products; information gathering, research, and marketing activities; resale of hardware and software; sale, installation, and implementation of IT systems and networks and application development; and IT Infrastructure, cloud services, and maintenance services. It serves wholesale/retail, financial institutions, offices and factories, telecommunication, automotive and transport, public and educational institutions, science, and energy and resources industries. The company was founded in 1972 and is headquartered in Tokyo, Japan. ITOCHU Techno-Solutions Corporation operates as a subsidiary of ITOCHU Corporation.

About Magic Software Enterprises

Magic Software Enterprises Ltd. provides proprietary application development, vertical software solutions, business process integration, information technologies (IT) outsourcing software services, and cloud-based services in Israel and internationally. Its Software Services segment develops, markets, sells, and supports application platform, software applications, and business and process integration solutions and related services. The company’s IT Professional Services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, and supplemental outsourcing services. It also offers proprietary application platforms, such as Magic xpa for developing and deploying business applications; AppBuilder for building, deploying, and maintaining business applications; Magic xpi for application integration; Magic xpi cloud native; FactoryEye for virtualization of production data; Magic Data Management and Analytics Platform for data management; and Magic SmartUX for cross-platform mobile business applications. The company also provides vertical software solutions comprising Clicks, a software solution for healthcare providers; Leap, a software solution for business support systems; Hermes Cargo, a packaged software solution for managing air cargo ground handling; HR Pulse, a single-tenant software as a service tool; MBS Solution, a system for managing TV broadcast management; Nativ, a system for management of rehabilitation centers; and Mobisale, a system for sales and distribution field activities for consumer goods manufacturers and wholesalers. In addition, It provides software maintenance, support, training, and consulting services. The company was formerly known as Mashov Software Export (1983) Ltd. and changed its name to Magic Software Enterprises Ltd. in 1991. The company was incorporated in 1983 and is headquartered in Or Yehuda, Israel.