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.
When I was updating my spreadsheet, I noticed that the EPS came in a bit lower than expected. The expected was $6.85 and the EPS was $6.61. Last year the EPS for 2019 and 2020 were $7.14 and $8.30. However, the current estimates are a lot lower at $4.97 and $6.73.
Dividends have been paid in US$ since 1999. The current dividend yield is in the moderate arrange (2% to 4% ranges) at 2.60%. The 5, 10 and historical yields are low (below 2%) to moderate (2% to 4% ranges) at 2.08%, 1.99% and 1.84% respectively. These are in US$. The dividend growth is in the moderate (8% to 14% ranges) to good (15% and above). The last dividend increase was for 10.6%. It is different in Canada and US due to the changes in the exchange rate.
The Dividend Payout Ratios are good. The DPR for EPS for 2018 in US$ is 20% with 5 year coverage at 18%. The DPR for CFPS in 2018 in US$ is 11% with 5 year coverage also at 11%. The DPR for Free Cash Flow in 2018 in CDN$ is 22% with 5 year coverage at 27%. I am getting my FCF values from Wall Street Journal which gives them CDN$.
Debt Ratios are fine except for the Liquidity Ratios which are a bit low. The Long Term Debt/Market Cap Ratio for 2018 is 0.21 with a current one at 0.17. The Liquidity Ratio for 2018 is 1.15 with 5 year median at 1.26. If you add in cash flow after dividends the ratio becomes 1.47 with a 5 year median at 1.58. The ratios are a bit low and I prefer ratios to be at 1.50 or higher. The Debt Ratio for 2018 is 1.75 with 5 year median at 1.86. The Leverage and Debt/Equity Ratios for 2018 are 2.42 and 1.38. The 5 year medians at 1.98 and 0.98.
The Total Return per year is shown below for years of 5 to 27 to the end of 2018 CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 21.93% | 9.81% | 7.31% | 2.50% |
| 2008 | 10 | 16.66% | 24.08% | 21.03% | 3.05% |
| 2003 | 15 | 9.86% | 7.53% | 6.16% | 1.37% |
| 1998 | 20 | 11.34% | 6.43% | 5.02% | 1.41% |
| 1993 | 25 | 12.73% | 8.08% | 6.53% | 1.55% |
| 1991 | 27 | 11.22% | 14.72% | 11.66% | 3.06% |
The Total Return per year is shown below for years of 5 to 27 to the end of 2018 US$.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 15.58% | 4.41% | 2.07% | 2.34% |
| 2008 | 10 | 15.41% | 23.21% | 19.77% | 3.44% |
| 2003 | 15 | 9.46% | 7.40% | 5.62% | 1.78% |
| 1998 | 20 | 11.98% | 6.75% | 5.04% | 1.71% |
| 1993 | 25 | 12.60% | 8.02% | 6.28% | 1.74% |
| 1988 | 27 | 16.38% | 6.94% | 5.46% | 1.48% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.13, 8.55, and 9.96. The corresponding 10 year ratios are 6.86, 9.04 and 10.45. The corresponding historical ratios are 8.13, 11.83 and 12.56. The current P/E Ratio 7.87 based on a stock price of $73.93 and 2019 EPS Estimate of $9.40 ($7.14 US$). This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in CDN$.
Since we are close to 2020, it might be a good idea to look at the P/E Ratio for 2020. The 2020 P/E Ratio is 6.77 based on a stock price of $73.93 and 2020 EPS estimate of $10.92 ($8.30 US$). This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a Graham Price of $96.77. The 10 year low, median, and high median Price/Graham Price Ratios are 0.61, 0.79 and 0.99. The current P/GP Ratio is 0.76 based on a stock price of $73.93. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.54. The current P/B Ratio is 1.67 based on a stock price of $56.16, Book Value of $11,018M, Book Value per Share of $33.66. The current ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.86%. The current dividend yield is 2.60% based on $1.46 and a stock price of $56.16. The current yield is 40% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
The 10 year median dividend yield is 2.01%. With the current dividend yield at 2.60%, the current dividend yield is 30% above the 10 year median yield. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.42. The current P/S Ratio is 0.47 based on 2019 Revenue estimate of $39,287M, Revenue per Share of 120.02 and a stock price of $56.16. The current ratio is 11% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio testing is an important one. The estimate is a bit lower than revenue for 2018 but 12 month revenue to date is lower than the 2018 revenue also. So lower revenue estimate seems reasonable. Dividends and EPS are rising faster than revenue. This is not sustainable on a long term basis. The dividend yield test shows the stock price at cheap, but the P/B Ratio shows it reasonable.
Is it a good company at a reasonable price? I would think that the current stock price is reasonable. This company has been making profits and has produced solid returns for shareholders in the past and will probably continue to do so.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (3), Hold (11) and Sell (2). The consensus would be a Hold. The stock price consensus is $80.25 (60.98 US$). This implies a total return of 11.15% with 8.55% from capital gains and 2.60% from dividends.
See what analysts are saying about this stock on Stock Chase. Some see it as a buy. Joey Frenette on Motley Fool talks how this stock suffered in the last market crash but it did well once it took off again. A writer on Simply Wall Street talks about this stock price growing faster than the EPS. A writer on Simply Wall Street thinks investors in this stock should keep an eye on their debt levels. Anthony Bellafiore on Modern Readers talk about Royal Bank starting coverage of this stock.
Magna International automotive supplier's product groups include exteriors, interiors, seating, roof systems, body and chassis, powertrain, vision and electronic systems, closure systems, electric vehicle systems, tooling and engineering, and contracted vehicle assembly. Roughly half of Magna's revenue comes from North America while Europe accounts for approximately 40%. Its web site is here Magna International Inc.
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 Richards Packaging Income Fund (TSX-RPI.UN, OTC-RPKIF) ... learn more on Monday, December 23, 2019 around 5 pm.
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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