Is it a good company at a reasonable price? The stock price is testing reasonable and it may even be cheap.
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 risky and it is not the sort of company I usually buy.
When I was updating my spreadsheet, I noticed that the EPS for 2021 increased basically in line with what happened. Analysts gave an EPS estimate of $4.54, an increase of 80% for 2021, and it came in at $5.00, and increase of 98%. However, last analyst thought that for EPS 2022 and 2023 would be $6.77 and $10.10 US$. However, the company has not done that well in the first 3 quarters of 2022 and EPS for 2022 and 2023 are now $4.03, and $6.21 US$.
If you had invested in this company in December 2011, for $1,003.00 CDN$ you would have bought 59 shares at $17.00 CDN$ per share. In December 2021, after 10 years you would have received $823.97 CDN$ in dividends. The stock would be worth $6,038.65 CDN$. Your total return would have been $6,862.62 CDN$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $17.00 | $1,003.00 | 59 | 10 | $823.97 | $6,038.65 | $6,862.62 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.05%. The 5 and 10 year median dividend yields are also moderate at 2.47% and 2.28%. The historical median dividend yield is low (below 2%) at 1.90%. The dividend growth is moderate (8% to 14% ranges) at 11.5% per year over the past 5 years. The last dividend increase was in 2022 and it was for 4.7%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 34% with 5 year coverage at 28%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 34% with 5 year coverage at 27%. The DPR for Cash Flow per Share for 2021 is 16% with 5 year coverage at 14%. The DPR for Free Cash Flow (FCF) for 2021 is 29% with 5 year coverage at 22%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is good and low at 0.15. The Liquidity Ratio for 2021 is low at 1.30, but if you had in cash flow after dividends, it is fine at 1.53. I prefer this to be at 1.50 or high. The Debt Ratio for 2021 is good at 1.73. Leverage and Debt/Equity Ratios for 2021 are fine at 2.46 and 1.42.
The Total Return per year is shown below for years of 5 to 33 to the end of 2021 in CDN$. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 10.61% | 14.41% | 11.91% | 2.50% |
| 2011 | 10 | 16.04% | 22.98% | 19.66% | 3.32% |
| 2006 | 15 | 11.21% | 12.11% | 10.54% | 1.57% |
| 2001 | 20 | 7.21% | 8.72% | 7.36% | 1.37% |
| 1996 | 25 | 10.55% | 8.51% | 7.11% | 1.40% |
| 1991 | 30 | 13.41% | 15.17% | 12.27% | 2.91% |
| 1988 | 33 | 9.19% | 13.88% | 11.39% | 2.49% |
The Total Return per year is shown below for years of 5 to 33 to the end of 2021 in 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 11.46% | 15.83% | 13.28% | 2.56% |
| 2011 | 10 | 13.15% | 20.20% | 17.13% | 3.07% |
| 2006 | 15 | 10.59% | 11.48% | 9.72% | 1.76% |
| 2001 | 20 | 8.44% | 10.20% | 8.49% | 1.72% |
| 1996 | 25 | 10.90% | 9.54% | 7.91% | 1.63% |
| 1991 | 30 | 13.06% | 14.53% | 11.85% | 2.68% |
| 1988 | 33 | 9.03% | 13.59% | 11.18% | 2.42% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.97, 9.21 and 10.46. The corresponding 10 year ratios are 7.55, 9.37 and 10.69. The corresponding historical ratios are 8.13, 11.49 and 12.56. The current P/E Ratio is 14.62 based on a stock price of $79.36 and EPS estimate for 2022 of $5.43 ($4.03 US$). The current ratio is above the high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 6.64, 8.23 and 9.87. The corresponding 10 year ratios are 6.87, 9.20 and 11.16. The current P/AEPS ratio is 12.63 based on a stock price of $58.49 and AEPS estimate for 2022 of $4.63. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a Graham Price of $77.50. The 10-year low, median, and high median Price/Graham Price Ratios are 0.64, 0.80 and 0.98. The current P/GP Ratio is 1.02 based on stock price of $79.36. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 1.57. The current ratio is 1.60 based on a Book Value of $10,441M, Book Value per Share of $36.52 and a stock price of $58.92. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$ and you would have a similar result in CDN$.
I have an Book Value per Share estimate for 2022. That estimate is $39.50. The ratio would be 1.48 based on a stock price of $58.92 and Book Value of $11,293M. This ratio is below the 10 year median ratio of 1.57 by 5.5%. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.05. The current P/CF Ratio is 7.36 based on a Cash Flow per Share estimate for 2022 of $7.95, Cash Flow of $2,273M and a stock price of $58.92. The current ratio is 46% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$ and you will get a similar result in CDN$.
I get an historical median dividend yield of 1.98%. The current dividend yield is 3.08% based on dividends of $1.80 and a stock price of $58.92. The current dividend yield is 55% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you would get a similar result in CDN$.
I get a 10 year median dividend yield of 2.33%. The current dividend yield is 3.08% based on dividends of $1.80 and a stock price of $58.92. The current dividend yield is 32% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you would get a similar result in CDN$.
The 10-year median Price/Sales (Revenue) Ratio is 0.45. The current P/S Ratio is 0.44 based on Revenue estimate for 2022 of $37,767M, Revenue per Share of $132.10 and a stock price of $58.92. The current ratio is 0.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$ and you would get a similar result in CDN$.
Results of stock price testing is that the stock price is reasonable and it may even be cheap. The dividend yield tests say that the stock price is cheap. The P/S Ratio test say it is reasonable. Other tests vary from reasonable to expensive.
I look at the total return over several years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the current P/E Ratios for good returns are today sort of in the middle. For P/S Ratio, most are lower than today. Also, the beginning yields are mostly lower than today.
In the following chart the capital gains for the 10 years to December 31, 2021 is 22.98% per year. The beginning yield was at 2.90%, and the P/E Ratio and the P/S Ratio were at 7.96 and 0.27. Does this chart change my opinion of the stock price? No. Except for the 32 year Total Return, the current dividend yield is higher than any other period.
| Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 14.41% | 8.41 | 0.46 | 2.26% |
| 10 | 22.98% | 7.96 | 0.27 | 2.90% |
| 15 | 12.11% | 16.69 | 0.36 | 1.90% |
| 20 | 8.72% | 10.24 | 0.50 | 2.14% |
| 25 | 8.51% | 24.62 | 1.37 | 0.95% |
| 30 | 15.17% | 22.03 | 0.22 | 1.54% |
| 32 | 13.88% | 16.97 | 0.27 | 4.04% |
| current | 14.62 | 0.45 | 3.05% |
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (7), Hold (4) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $108.66 ($80.68 US$). This implies a total return of $39.97% with 36.92% from capital gains and 3.05% from dividends based on a stock price of $79.36.
Most analyst on Stock Chase think this stock is a buy, but some do not. Stock Chase gives this stock 5 stars out of 5. Magna is on Money Sense list with a B rating. Chris MacDonald on Motley Fool reviews this stock. Joey Frenette on Motley Fool says dividend stocks make it worth your while to hold them in a recessionary year. The company put out a Press Release on their 2021 year results. The company put out a press release on Global Newswire about their third quarter of 2022.
Simply Wall Street on Yahoo Finance reviews this stock. It says the fair value is $158.07 CDN$. Simply Wall Street gives two risks of large one-off items impacting financial results and profit margins (2.6%) are lower than last year (4.7%). It is because of such things that large one-off items that we have AEPS.
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. Magna's revenue comes from North America and Europe. 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 12, 2022 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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