Is Magic Software Enterprises Ltd. overvalued or undervalued?

As of 13 August 2025, the valuation grade for Magic Software Enterprises Ltd. has moved from attractive to very attractive, indicating a strong improvement in its valuation outlook. The company is currently considered undervalued, supported by a P/E ratio of 18, an EV to EBITDA of 9.03, and a PEG ratio of 1.97. In comparison, its peers such as Karooooo Ltd. have a higher P/E ratio of 30.12, while HealthStream, Inc. shows a significantly elevated P/E of 40.95, further emphasizing Magic's relative attractiveness.
Despite recent underperformance against the S&P 500 in the short term, with a 1-week return of -3.03% compared to the index's 1.05%, Magic Software has delivered impressive year-to-date and one-year returns of 64.67% and 74.85%, respectively, outpacing the S&P 500's 12.22% and 17.14%. This performance, combined with its favorable valuation metrics, reinforces the conclusion that Magic Software Enterprises Ltd. is indeed undervalued in the current market.