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Thinking about Magna International? If you are curious whether the stock is attractively priced or might be hiding greater value, you are not alone.
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The stock has held steady in the past week, up just 0.5%, but has climbed 15.0% year-to-date and is up 12.7% over the last twelve months. These trends may indicate a shift in investor sentiment.
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Recent news has focused on Magna’s ongoing investments in electric vehicle manufacturing and key partnership announcements with major automakers. These headlines have highlighted both the company’s growth ambitions and the challenges facing the automotive sector, providing important context to recent price movements.
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Currently, Magna International scores 4 out of 6 on our valuation checks, showing the company appears undervalued in several key respects. We will break down these approaches next and discuss an even more insightful way to get the full picture at the end of this article.
Find out why Magna International’s 12.7% return over the last year is lagging behind its peers.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s value. This approach helps investors assess whether a stock is currently priced above or below what its future profits suggest it should be worth.
For Magna International, the most recent Free Cash Flow stands at $1.47 Billion. Analyst projections see this remaining above $1 Billion annually for the next several years, with 2028’s expected Free Cash Flow at $1.31 Billion. After the analyst forecast horizon, Simply Wall St extrapolates further and indicates a steady trajectory in the company’s cash generation through 2035.
Based on this 2 Stage Free Cash Flow to Equity model, Magna International’s fair value comes out to $100.82 per share. With the current share price suggesting the stock is trading at a 32.2% discount, the DCF model implies Magna is significantly undervalued at this time.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Magna International is undervalued by 32.2%. Track this in your watchlist or portfolio, or discover 920 more undervalued stocks based on cash flows.
The Price-to-Earnings (PE) ratio is widely regarded as a useful valuation tool for profitable companies like Magna International. It helps investors quickly gauge how much they are paying for every dollar of earnings. A lower PE can signal an undervalued stock, while a higher PE might mean investors expect faster growth or are factoring in lower risk.
Growth prospects and company risk both play a significant role in what a “fair” or “normal” PE ratio should be. High-growth, low-risk companies usually command bigger multiples, while slower-growing or riskier companies trade below sector averages.
Currently, Magna International trades at 13.4x earnings. For reference, the auto components industry is at 20.0x, while peers average an even higher multiple of 24.7x. This shows the stock is valued more conservatively than much of its sector.
Simply Wall St’s proprietary “Fair Ratio” adds another layer of insight. Rather than just look at industry averages or peers, the Fair Ratio considers Magna’s specific business traits, such as its earnings growth, profit margins, market cap, and risk profile. This tailored approach offers investors a more meaningful benchmark, pointing to what is reasonable given the company’s true fundamentals.
When comparing Magna International’s actual PE of 13.4x to its Fair Ratio, the numbers are closely aligned, suggesting the stock’s valuation today is about right for its growth outlook and risk level.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives.
A Narrative is a concise, evidence-based story about a company that ties together your assumptions on future revenue, earnings, and profit margins with a specific fair value. This approach gives context and meaning to the numbers often seen in traditional valuation methods.
Rather than relying solely on data points or ratios, Narratives let you express your outlook for Magna International by linking its business story, your financial forecast, and the resulting share value in a single, accessible view.
On Simply Wall St’s Community page, Narratives make investing easier and more dynamic by enabling you to compare your own fair value with the current price. This helps you decide if it’s the right time to buy, hold, or sell.
Best of all, Narratives update automatically as new events such as news, quarterly results, or earnings forecasts are published. This ensures your view remains relevant without constant manual analysis.
For Magna International, for instance, one Narrative might see fair value as high as CA$80.21, pointing to optimism about expansion initiatives. Another investor could set it as low as CA$54.51, due to concerns about industry headwinds and profit pressures.
Do you think there’s more to the story for Magna International? Head over to our Community to see what others are saying!
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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