Magna International (TSX:MG) has posted steady gains over the past month, climbing 6%. Its share price recovery comes as the company continues to attract investor attention in the automotive sector, even though its longer-term returns have been mixed.
See our latest analysis for Magna International.
Magna’s momentum is showing signs of building again. While the 30-day share price return of 6.3% is encouraging, investors might be even more interested in its 12.4% year-to-date share price gain and a 17.4% total shareholder return over the past year, despite longer-term total returns still dragging modestly behind.
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With shares climbing and total returns improving, investors now have to ask: is Magna International’s recent rally a sign that the stock remains undervalued, or has the market already priced in all the company’s future growth?
With Magna International closing at CA$66.85 and the narrative’s fair value set at CA$69.38, the stock looks modestly discounted by current consensus. The numbers behind this view tell a nuanced story of growth ambitions and operational fine-tuning.
Magna International is focusing on operational excellence and restructuring actions, which are expected to result in meaningful margin expansion over the next two years. This is likely to positively impact net margins and earnings.
What is really fueling this fair value estimate? It centers on margin expansion, a global push in China, and ambitious free cash flow projections. There is a twist: consensus leans on some bold profitability targets that you might not expect from an auto giant. Find out what assumptions are working overtime under this valuation.
Result: Fair Value of $69.38 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, ongoing pressure from lower vehicle production and foreign exchange headwinds could still undermine Magna’s margin growth and future earnings outlook.
Find out about the key risks to this Magna International narrative.
If you see the story differently or want to crunch the numbers yourself, you can piece together your own viewpoint in just a few quick steps: Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Magna International.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include MG.TO.
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