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. They can be cyclical.
When I was updating my spreadsheet, I noticed that 2019 was not a good a year as the company had in 2018. The first 9 months of this year is not as good as they had in the first 9 months of 2019. However, the company raised their dividends in 2020, so at that time management would seem to be optimistic. It will be interesting to see if they again raise their dividends in 2021.
In 2019, Revenue was down by 3.4% and EPS was down by 15%. For the first 9 months or third quarterly report, Revenue is down by 20% and EPS is down by 73%. In 2020, the dividends were increased by 9.6% which is lower than for the last 5 years where dividend increases were 13.9% per year. Analysts expect a small increase in dividends in 2021 of just over 1%, but a better one, over 10% in 2022. Dividend increases give you an idea on how the management of a company feels about the near future.
The dividend yields are moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 2.48%. The 5, and 10 median dividend yields are also moderate at 2.39% and 2.21%. The historical median dividend yield is low (below 2%) at 1.92%.
Dividend growth is currently good with 5 year growth at 14% per year. The last dividend increase was in 2020 and it was lower at 9.6%. Note that the dividend growth for the past 10 years is high because exactly 10 years ago dividends were cut 85%, and then started to grow again in the following year.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 26% with 5 year coverage at 21%. The DPR for CFPS for 2019 is 12% with 5 year coverage also at 12%. The DPR for Free Cash Flow is 22% with 5 year coverage at 25%.
Debt Ratios are fine. The Long Term Debt/Market Cap is good and low at 0.18. The Liquidity Ratio is low at 1.26. However, if you add in Cash Flow after dividends, it is good at 1.67. The Debt Ratio for 2019 is fine at 1.76. The Leverage and Debt/Equity Ratios for 2019 are 2.38 and 1.35 and are also fine.
The Total Return per year is shown below for years of 5 to 31 to the end of 2019 CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 17.62% | 4.73% | 2.49% | 2.24% |
| 2008 | 10 | 41.71% | 21.34% | 18.25% | 3.08% |
| 2003 | 15 | 10.14% | 8.99% | 7.52% | 1.47% |
| 1998 | 20 | 8.08% | 9.82% | 7.98% | 1.84% |
| 1993 | 25 | 11.23% | 8.85% | 7.20% | 1.65% |
| 1988 | 30 | 9.64% | 14.36% | 11.51% | 2.84% |
| 1987 | 31 | 9.31% | 13.51% | 10.89% | 2.63% |
The Total Return per year is shown below for years of 5 to 31 to the end of 2019 US$. 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 | 13.95% | 2.28% | 0.18% | 2.10% |
| 2008 | 10 | 41.62% | 18.88% | 15.80% | 3.08% |
| 2003 | 15 | 9.58% | 8.48% | 6.73% | 1.75% |
| 1998 | 20 | 8.66% | 10.51% | 8.36% | 2.15% |
| 1993 | 25 | 11.57% | 8.55% | 6.84% | 1.72% |
| 1988 | 30 | 9.29% | 13.81% | 11.06% | 2.74% |
| 1987 | 31 | 9.06% | 13.14% | 10.54% | 2.60% |
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 7.09, 9.37 and 10.69. The corresponding historical ratios are 7.97, 11.39 and 12.54. The current P/E Ratio is 32.57 based on a stock price of $82.34 and EPS estimate for 2020 of $1.98. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
However, the EPS estimate for 2020 is 65% below the EPS for 2019. The EPS is expected to recover in 2021. The P/E Ratio for 2021 is expected to be 11.39 based on a stock price of $82.34 and EPS estimate for 2021 of $7.23. This stock price testing also suggests that the stock price is relatively expensive. This 2021 P/E Ratio is a lot lower than for 2020. This is in CDN$.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, 20, 25, 30 and 31 year periods, I find the following. For example, total return over the past 15 years is 8.99% per year, the starting P/E Ratio (the one from 15 years ago) was 11.49. From this point of view, a P/E Ratio is 11.39 would be fine.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 4.73% | 12.49 |
| 10 | 21.34% | -11.54 |
| 15 | 8.99% | 11.49 |
| 20 | 9.82% | 9.39 |
| 25 | 8.85% | 20.31 |
| 30 | 14.36% | 9.34 |
| 31 | 13.51% | 16.97 |
I get a Graham Price of $49.44. The 10 year low, median, and high median Price/Graham Price Ratios are 0.61, 0.78 and 0.92. The current P/GP Ratio is 1.67 based on a stock price of $82.34. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
However, the Graham Price is greatly affected by the EPS estimate for 2020. The Graham Price for 2021 is 82.34. The 2021 P/GP Ratio is 0.98. This stock price testing also suggests that the stock price is relatively expensive. This 2021 P/GP Ratio is a lot lower than for 2020. 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 1.92 based on a current Book Value of $10,206M, Book Value per Share of $33.66 and a stock price of $64.50. The current P/B Ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.17. The current P/CF Ratio is 8.67 based on a stock price of $64.50, Cash Flow per Share estimate for 2020 of $7.44 and Cash Flow of $2,256. The current P/CF Ratio is 68% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
However, the Cash Flow per Share is expected to drop 43% in 2020 and recover in 2021. The 2021 P/CF Ratio is 5.97. This is based on Cash Flow per Share estimate for 2021 of $10.80, Cash Flow of $3,275 and a stock price of $64.50. The 2021 P/CF Ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.92%. The current dividend yield is 2.48% based on a stock price of $64.50 and dividends of $1.60. The current dividend yield is 29% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
I get a 10 median dividend yield of 2.21%. The current dividend yield is 2.48% based on a stock price of $64.50 and dividends of $1.60. The current dividend yield is 14% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.42. The current P/S Ratio is 0.61 based on a stock price of $64.50, Revenue estimate for 2020 of $32,007M, and Revenue per Share of $105.55. The current P/S Ratio is 44% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
However, the Revenue is expected to fall by 19% this year and recover somewhat in 2021. The P/S Ratio for 2021 is 0.52 based on Revenue estimate for 2021 of $37,796M, Revenue per Share of $124.64 and a stock price of $64.50. The 2021 P/S Ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably reasonable to expensive. Both dividend yield tests are showing the price as being reasonable. The 2020 good dividend increase shows that management feels good about the future. However, this was not confirmed by the P/S Ratio tests which say the stock price is expensive. The P/CF Test is showing a reasonable price. All the rest are showing the price as relatively expensive. I was doing testing using US$ because this company reports in US$.
Is it a good company at a reasonable price? Price is probably reasonable to expensive. Long term returns vary, but this is a cyclical stock and so this would be expected. I think the company is good. You have to realize it is cyclical. It is a Dividend Growth company which is always something I like. There are probably lots of Buy recommendations with analysts going for momentum. The 12 month stock price consensus is low, but analysts often are conservative in the 12 month stock price.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (6), Hold (5) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $79.51 ($62.27 US$). This implies a total loss of 0.95%, with a capital loss of 3.43% and dividends of 2.48%.
Most of the analysts like this stock on Stock Chase. The one analyst that did not said it was cyclical and it is. Joey Frenette on Motley Fool thinks we are heading for a correction and this would be a good stock to downsize at present. A writer on Simply Wall Street complains about the recent ROE for this company. However, the company is having a bad year. The 5 year median ROE is quite good at 16.9%. This is a cyclical stock. A writer on Simply Wall Street says the stock’s intrinsic value is $63.74 CDN$. Recently Business Wire talked about an agreement between Fisker Inc. (NYSE: FSR) and Magna International Inc.
Magna International Inc is an independent supplier of original equipment components, assemblies, modules and systems and related tooling for cars and light trucks. The Company designs, develops and manufactures a diversified range of these products, primarily for North American and European original equipment manufacturers. 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 21, 2020 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.
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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment