Is it a good company at a reasonable price? Just because a stock is cheap, it does not mean that it is a good buy. There is a lot of uncertainty in the car industry at present and this is especially true when talking about EV cars. So even though this stock is cheap, it might be quite risky. That means that you should not invest any money into this stock that you cannot afford to lose.
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. 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 a number of officers and directors I was following have left the company. Also, most of the current directors, including the Chairman, have no shares in the company.
If you had invested in this company in December 2013, for $1,001.65 you would have bought 23 shares at $43.55 per share. In December 2023, after 10 years you would have received $405.01 in dividends. The stock would be worth $1,800.67. Your total return would have been $2,205.68. This would be a total return of 8.96% per year with 6.04% from capital gain and 2.92% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $43.55 | $1,001.65 | 23 | 10 | $405.01 | $1,800.67 | $2,205.68 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate 2% to 4% ranges) at 4.13%. The 5 and 10 year median dividend yields are also moderate at 2.93% and 2.43%. The historical median dividend yield is low (below 2%) at 1.99%. The dividend growth is low at 6.9% per year over the past 5 years. The last dividend increase was in 2024 and it was for 3.3%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 44% with 5 year coverage at 44%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 34% with 5 year coverage at 35%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 18% with 5 year coverage at 17%. The DPR for 2023 for Free Cash Flow (FCF) is too high at 139% with 5 year coverage good at 37%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 43.50% | 43.47% |
| AEPS | 33.52% | 35.12% |
| CFPS | 18.01% | 16.77% |
| FCF | 138.74% | 37.16% |
Debt Ratios are fine, but Liquidity Ratio could improve. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.25 and currently at 0.31. The Liquidity Ratio for 2023 is too low at 1.06 and 1.11 currently. If you added in Cash Flow after dividends, the ratios are still too low at 1.26 and currently at 1.28. I prefer these ratios be at 1.50 or higher. The Debt Ratio for 2023 is good at 1.61 and 1.59 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.71 and 1.68 and currently at 2.70 and 1.70.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.25 | 0.31 |
| Intang/GW | 0.22 | 0.27 |
| Liquidity | 1.06 | 1.11 |
| Liq. + CF | 1.26 | 1.28 |
| Debt Ratio | 1.61 | 1.59 |
| Leverage | 2.71 | 2.70 |
| D/E Ratio | 1.68 | 1.70 |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023 in CDN$. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.21% | 8.00% | 4.79% | 3.21% |
| 2013 | 10 | 13.80% | 8.96% | 6.04% | 2.92% |
| 2008 | 15 | 13.07% | 19.34% | 15.59% | 3.75% |
| 2003 | 20 | 8.94% | 7.63% | 5.83% | 1.80% |
| 1998 | 25 | 10.30% | 6.69% | 4.98% | 1.71% |
| 1993 | 30 | 11.62% | 8.07% | 6.24% | 1.82% |
| 1988 | 35 | 8.98% | 12.90% | 9.90% | 3.00% |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.87% | 8.71% | 5.39% | 3.32% |
| 2013 | 10 | 11.14% | 6.40% | 3.71% | 2.69% |
| 2008 | 15 | 12.49% | 19.02% | 14.77% | 4.25% |
| 2003 | 20 | 8.81% | 7.68% | 5.56% | 2.11% |
| 1998 | 25 | 10.94% | 7.07% | 5.11% | 1.96% |
| 1993 | 30 | 11.62% | 8.11% | 6.13% | 1.98% |
| 1988 | 35 | 8.70% | 12.51% | 9.52% | 3.00% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.72, 16.15 and 19.76. The corresponding 10 year ratios are 8.30, 10.01 and 11.71. The corresponding historical ratios are 8.48, 12.17 and 13.39. The current P/E Ratio is 10.10 based on a stock price of $64.65 and EPS estimate for 2024 of $6.40 ($4.57 US$). This ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.68, 12.37 and 18.61. The corresponding 10 year ratios are 7.85, 10.51 and 12.39. The current P/AEPS Ratio is 8.75 based on a stock price of $46.00 and AEPS estimate for 2024 of $5.26. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$ and you will get a similar result in CDN$.
I get a Graham Price of $90.95. The 10-year low, median, and high median Price/Graham Price Ratios are 0.73, 0.94 and 1.08. The current P/GP Ratio is 0.71 based on a stock price of $64.65. This is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 1.62. The current P/B Ratio is 1.16 based on a book Value of $11,379, Book Value per Share of $39.71 and a stock price of $46.00. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I also have a Book Value per Share estimate for 2024 of $45.84. This implies a ratio 1.00 with a stock price of $46.00 and Book Value of $13,134. This ratio is 38% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.24. The current ratio is 4.68 based on a stock price of $46.00, Cash Flow per Share estimate for 2024 of $9.83 and Cash Flow of $2,818M. This ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$ and you will get a similar result in CDN$.
I get an historical median dividend yield of 1.99%. The current dividend yield is 4.13% based on dividends of $1.90 and a stock price of $46.00. The current dividend yield is 108% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I get a 10 year median dividend yield of 2.48%. The current dividend yield is 4.13% based on dividends of $1.90 and a stock price of $46.00. The current dividend yield is 67% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
The 10-year median Price/Sales (Revenue) Ratio is 0.46. The current P/S Ratio is 0.31 based on Revenue estimate for 2024 of $42,553M, Revenue per Share of $148.52 and a stock price of $46.00. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably cheap. The dividend yield testing says this. It is confirmed by the P/S Ratio test. The rest of the testing is saying that the stock price is cheap to reasonable.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), Hold (12) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus would be $67.26 ($48.01 US$) with a high of $87.55 ($62.49 US$) and low of $37.32 ($26.64 US$). The consensus price of $67.26 implies a total return of 8.15% with 4.04% from capital gains and 4.12% from dividends.
The analysts on Stock Chase provide a lot of Sell and Do Not Buy recommendations on this company this year. They think this company is in a tough spot and that its best days are in the past. Stock Chase gives this stock 4 stars out of 5. Joey Frenette on Motley Fool thinks Magna is a dividend deep-value play that might be worth buying. Puja Tayal on Motley Fool thinks that Magna presents an attractive buying opportunity. The company put out a press release via Newswire about their 2023 results. The company put out a press release via Newswire about this third quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock. They think it is undervalued. They issue one warnings of large one-off items impacting financial results. Simply Wall Street gives this stock 4 stars out of 5.
Magna International Inc is an automotive supplier. Its 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 contract vehicle assembly. 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 Friday, December 6, 2024 around 5 pm. Tomorrow on my other blog I will write about Something to Buy December 2024.... learn more on Thursday, December 5, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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