I do not own this stock of Magna International Inc. (TSX-MG.A, NYSE-MGA), but I used to. It is also a stock I have tracked for some time. I have always liked Frank Stronach, the entrepreneur who used to run this company. I held this company between September 2002 and September 2006 and earned 5% return per year including dividends. This is in the automobile industry and this has not been a great industry to invest in for some time.
The insider trading report says that there was insider selling of $22.6M and insider buying of $1M, which leaves net insider selling at $21.6M. Most of the insider selling was by officers of the company who had almost $20M of insider selling. It would seem that officers are mostly cashing in options.
Insiders not only have things call options, but other options like vehicles called Rights Restricted Stock Units, Rights Restricted Shares and Units Deferred Share Units. Insiders do own shares, but there are an awful lot of options outstanding. For example, the CEO has shares worth around $20M and options worth around $66M; the CFO has shares worth $10.6M and options worth around $108M; and an officer has shares worth $1.1M and options worth $5.5M.
As far as I can see some 230 institutions own some 67% of the outstanding shares in this company and as of September 30, 2012 they have sold some 3% of the holdings. This is a negative. Insiders also seem to be also selling shares lately.
The 5 year median low, median and high median Price/Earnings Ratios are 7.61, 10.94 and 14.26. The current P/E ratio is 9.38 based on stock price $48.14 and 2012 EPS of $5.13CDN$. This low P/E ratio suggests that the current stock price is low. (Based on US$, P/E ratio is similar.)
I get a Graham price of $66.47. The 10 year low, median and high median Price/Graham Price Ratios are 0.75, 0.90 and 1.04. The current P/GP Ratio is 0.72. This low P/GP Ratio suggests that the stock price is cheap.
I get a 10 year median Price/Book Value per share Ratio of 1.15 and a current P/B Ratio of 1.26, a value some 9% higher. This ratio suggests that the stock price is still reasonable.
I get a 5 year median Dividend yield of 1.25% and a current yield of 2.26%. This higher dividend yield suggests that the stock price is cheap. (If you look at a longer period, the 10 year median dividend yield is 1.94 and the 10 year median high dividend yield is 2.31%. In any event, the stock is reasonable on this basis.)
My stock tests generally point to a current stock price that is relatively low.
When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. The consensus recommendation would be a Buy. The consensus 12 month stock price is $55.50. This implies a total return of 17.55% with 15.29% from capital gains and $2.26% from dividends.
One analyst thought that the stock price was currently high as no one seems to expect much in the way of growth in EPS for 2013 and that would make the PEG Ratio rather high. (PEG Ratio (i.e. Price to earnings growth ratio) is the P/E divided by the growth rate. In this case the P/E for 2013 is 9.22 and the growth is 1.7%, giving a PEG of 5.32.) Another analyst thought that investors would be better off with a smaller player in this industry rather than Magna.
Another analyst gave it a strong buy because he expects the stock price to rise some 23%; also he liked the new share structure, the recent dividend rise and the fact that Magna is buying back stocks. On analyst liked the stock because the company has a global footprint and the industry is currently experiencing growth.
Zacks research gives this stock a positive review. Jack A. Bass blogger thinks that the valuation is attractive, but growth is limited. Zolmax news commented on recent buy ratings on this stock.
Magna International is the most diversified global automotive supplier. They design, develop and manufacture technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers ("OEMs") of cars and light trucks. Their capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; hybrid and electric vehicles/systems; as well as complete vehicle engineering and assembly. Its web site is here Magna. See my spreadsheet at mg.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.
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