Magna International Inc.

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I do not own this stock of Magna International Inc. (TSX-MG, NYSE-MGA). 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. Magna is a stock I have tracked for some time. I have always liked Frank Stronach, the entrepreneur who used to run this company.

This company gives their vision as follows: We aim to be our customers' preferred global supplier partner for the automotive industry, by delivering the best value built on innovative products and processes and World Class Manufacturing. We strive to be the employer of choice, an ethical and responsible corporate citizen and a superior long-term investment for our shareholders. This is not bad for a mission statement.

First off, this is a dividend growth company and is classified as consumer discretionary. The dividends are paid in US$ so as a Canadian Investor you will have dividend fluctuate with the currency exchange rate. Dividend have not gone up every year, they have in fact gone down in some years and remain flat in other years.

However, over the longer term, they have gone up with the 5 and 10 year dividend growth at 15.2% and 6.5% per year in US$ and have gone up with the 5 and 10 year dividend growth at 12% and 4.5% per year in CDN$. The last dividend increase was in 2014 and was for 18.8% in US$. In CDN$ the increase between 2013 and 2014 was at 29.8%.

Revenue hit a low point in 2009 and has been increasing since then. Over the last 4 years revenues are up by 19% per year. If you look longer term revenues are up by 8% and 8.5% per year over the past 5 and 10 years. Earnings also hit a low in 2009 with negative earnings. Since earnings have been positive from 2008, the company has grown EPS by 17.4% per year.

Cash flow hit a low point in 2009 also. If you look at progress on Cash Flow per Share, it is up by 45% per year over the past 4 years. So currently this stock is doing well as far as growth in Revenue, Earnings and Cash Flow since hitting lows in 2009. All the above is in US$ as this company reports in US$.

For Return on Equity, this company has had this ratio north of 10% since 2009. The 2013 ROE is 15.2% and has a 5 year median of 12.2%. The ROE on Comprehensive Income is at 14.7% with a 5 year median of 12.9%. This suggests that the earnings are of good quality.

The 5 year low, median and high median Price/Earnings Ratios are 6.68, 9.62 and 12.54. Although this is not far off the corresponding 5 year P/E Ratios in US$, they are a bit lower than the corresponding 10 year P/E Ratios in CDN$ which are 9.30, 11.58 and 13.79. The current P/E Ratio at 13.72 is based on a stock price of $126.58 and 2014 EPS estimate of $7.94 US$ and $9.23CND$. This stock price testing suggests that the stock price is still relatively reasonable although at the top end of the reasonable range.

I get a Graham Price of $99.26. The 10 year low, median and high median Price/Graham Price Ratios are 0.74, 0.85 and 1.02. The current P/GP Ratio is 1.28 based on a stock price of $126.58. This stock price testing suggests that the stock price is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 1.22 and the current P/BV Ratio at 2.67 is some 119% higher. This stock price testing suggests that the stock price is relatively expensive.

The current dividend yield is 1.40%. The 5 year median, historical average and historical median dividend yields are 1.93%, 1.94% and 1.77% which are all more than 20% higher than the current dividend yield. This stock price testing suggests that the stock price is relatively expensive.

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Buy recommendation. The 12 month consensus stock price is $117.00 US$ or 135.99 CDN$. This would imply total return of 8.83% with $7.43 from capital gains and 1.40% from dividends.

Zacks issued a Buy ranking recently on this stock, but worried about its dependence on a few customers. The Motley Fool feels that this company will outperform the TSX in 2015. Legacy talks about a number of company's issuing a Neutral rating on this stock. A Neutral rating is a Hold rating.

Sound bit for Twitter and StockTwits is: Dividend growth stock, but rather expensive. Yes, this company has grown well since 2009 but, so has the stock price grown with the stock price up by 35.6% per year since 2009. See my spreadsheet at mg.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow. This is my last stock to talk about this year and completes my list of stocks.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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