Friday, December 30, 2016

Magna International Inc.

Sound bite for Twitter and StockTwits is: Price cheap to reasonable. Buy for capital gains and increasing dividends. See my spreadsheet on Magna International Inc.

I do not own this stock of Magna International Inc. (TSX-MG, NYSE-MGA) but I used to. 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.

You would buy this stock for diversification reasons. There may be volatility in this stock, especially concerning Earnings and Cash Flow. You should buy it for both rising dividends and capital gain appreciation. You should expect low to moderate dividend yield and low to moderate dividend growth. Dividends could also be decreased as well is increased.

The current dividend yield is moderate, but the historical median dividend yield is low. The current dividend yield is 2.29%. The historical median dividend yield is 1.75%. Even the 5 and 10 year dividend yield median are low at 1.86 and 1.82 respectively. The 5 year dividend growth looks good, but that is only because dividends had been cut a little more than 5 years ago, but they were increased back to and past the old dividend number in a couple of years. The 5 and 10 year dividend growth rate is at 33.2% and 8.8% per year.

They can afford their dividends. The Dividend Payout Ratio for 2015 is 18.03% and the 5 year coverage is 18% with 5 y3ar coverage at 18.8%. This is a good coverage rate. The DPR for 2015 for CFPS is at 13.2% with 5 year coverage at 11.7%. This is in US$ terms.

Since outstanding shares have been declining it is best to look not at per share growth but growth in Revenue, Earnings and Cash Flow. Shares are down by 3.7% and 0.8% per year over the past 5 and 10 years. For example Revenue is up by 5.9% and 3.5% per year over the past 5 and 10 years. Revenue per Share is up by 10% and 4.4% per year over the past 5 and 10 years. Declining shares of course makes more of a difference over the past 5 years rather than 10 year periods.

Because of possible volatility in this company's business good debt ratios are essential and these are adequate with Liquidity Ratio at 1.53 but with a 5 year median of just 1.37. When you add in cash flow after dividends this raises to 1.81 with a 5 year median value of 1.65. Leverage and Debt/Equity Ratios for 2015 are 2.20 and 1.18, respectively.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.65, 9.79 and 12.48. The corresponding 10 year values are 7.89, 10.14 and 12.55. The corresponding historical year values are 8.94, 12.58 and 14.04. The current P/E Ratio is 8.36 based on a stock price of $59.09 and 2016 EPS Ratio of and $7.07 CDN$ ($5.22 US$). The P/E Ratio for 2017 is 7.69 based on a stock price of $59.09 and 2017 EPS Ratio of and $7.69 CDN$ ($5.68 US$). This is in CDN$, but you get similar results in US$. This stock price testing suggests that the stock price is reasonable and below the median.

I get a Graham Price of $74.06 CDN$. The 10 year low, median and high median Price/Graham Price Ratios are 0.78, 0.90 and 1.04. The current Price/Graham Price Ratio is 0.80 based on a stock price of $59.09. This stock price testing suggests that the stock price is reasonable and below the median.

The historical Dividend Yield is 1.74%. The current Dividend Yield is 2.29% based on dividends of $1.35 and a stock price of $59.09 CDN$ or $1.00 and a stock price of $43.58 US$. The current yield is some 31.6% above the historical median yield. This stock price testing suggests that the stock price is cheap.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform Recommendations. Most of the recommendations are Buy and Hold and the consensus recommendation is a Buy. The 12 month stock price consensus is $53.25 US$ or $72.07 CDN$. This is implies a total return of 24.48% with 22.19% from capital gains and 2.29% from dividends. This is based on a stock price of $59.09 CDN$ or $43.58 US$.

This site shows some measures made on this company at Highland Digest. This stock's Value Composite score of 5 shows that the stock may be undervalued. Andrew Walz on Wall Street Confidential talks about additions or reductions of this company by funds. He says that Miller Howard Investments Inc. purchased a new position in Magna International Inc. See what analysts are saying about this stock on Stock Chase

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

Also, on my book blog I have put a review of the book Silk Roads by Peter Frankopan learn more...

The last stock I wrote about was about was Methanex Corp. (TSX-MX, NASDAQ-MEOH)... learn more . The next stock I will write about will be Metro Inc. (TSX-MRU, OTC-MTRAF)... learn more on Tuesday, January 03, 2017around 5 pm.

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 International Inc.

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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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