Tuesday, December 17, 2013

Magna International Inc. 2

I do not own this stock of Magna International Inc. (TSX-MG, NYSE-MGA). Magna is a stock I have tracked for some time. I have always liked Frank Stronach, the entrepreneur who used to run this company. Manufacturing firms are fairly risky and it is not the sort of company I usually buy.

I held this company between September 2002 and September 2006 and earned 5% return per year including dividends. When I bought this stock in 2002, I felt I was paying a good price for it. There were some rumors that it might be bought out in 2006, so I sold.

Over the past year insider trading has been $31.6M of insider selling and no insider buying. The company is also busy buying back shares. There has been no insider selling in the past month. There is insider ownership with the CEO owning shares worth around $44.7M and the CFO owing shares worth around $22.7M.

Not only is there options, but there are options like vehicles called Rights Restricted Stock Units, Rights Stock Appreciation Rights, Rights Restricted Shares and Units Deferred Share Units. There are lots of these options and options like vehicles outstanding for insiders.

The 5 year low, median and high median Price/Earnings per Share Ratios are 6.68, 9.62 and 12.56. These are rather low P/E Ratios. The 10 year low, median and high median P/E Ratios are 10.96, 12.38 and 14.25. The current P/E Ratio is 12.39 based on a stock price of $83.74 and 2013 EPS estimate of $6.76 CDN$. The P/E using the 2014 EPS estimate is even lower at 10.39 using the current stock price of $83.74 and EPS estimate of $8.06 CDN$.

I get a current Graham Price of $82.83 CDN$. The 10 year low, median and high median P/GP Ratios are 0.76, 0.90 and 1.02. The P/GP ratio would be 1.01. The 2014 Graham Price is $90.46 with a P/GP Ratio of 0.93. The first test shows that the stock price is relatively high and the second shows it is relatively reasonable.

The 10 year median Price/Book Value per share Ratio is 1.21 and the current P/B Ratio is 1.88 a value some 53% higher. This stock test shows that the stock price is relatively high.

The current dividend yield is 1.62% and the 5 year median is 2.17% a value some 26% higher. What you want is a current dividend yield higher than the 5 year median dividend yield or at least close to it. These last two stock tests suggest that the stock price is rather high.

If you look at historical dividend yields, the historical high is 3.15% and the historical low is 0.74% with 1.95% being the historical average. The current dividend yield is still some 17% lower than the historical average and suggests that the stock price is relatively high.

When I look at analysts' recommendations they are all over the place. I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. Most of the recommendations are Buy and Hold recommendations. The consensus recommendation would be a Hold. The 12 months consensus stock price is $81.60 a value below the current stock price of $83.74. This implies a negative total return of 1% with 2.61% from dividends and a capital loss of 2.56%.

On December 13, 2013 Zacks site said that this stock has entered oversold territory. (Price ended at $83.74 CDN$ on this date.) There is also an article in Forbes in early December says that this stock was in oversold territory. There is also a good review of this stock at Motley Fool. In November 2013, the WKRB site said Morgan Stanley raised their 12 month stock price to $85.00 US$.

On some measures, the stock price would appear to be relatively high. See my spreadsheet at mg.htm.

This is the second of two parts. The first part was posted on Monday, December 16, 2013 and is available here.

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.

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.

No comments:

Post a Comment