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If you are wondering whether Magna International’s current share price reflects its real worth, you are not alone. This article focuses squarely on what you might be paying for each dollar of the business.
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The stock last closed at US$69.61, after a 4.5% decline over the past week and a 7.2% decline over the past month, while the 1 year return sits at 26.7%.
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Recent news coverage has centered on Magna International’s role as a major auto parts supplier and its positioning across global vehicle production and electrification themes. This ongoing attention helps frame how investors are thinking about both the opportunities and risks that may sit behind the recent share price moves.
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On our valuation checks, Magna International scores 4 out of 6 for potential undervaluation, and you can see the breakdown in our valuation score. Next, we will walk through the main valuation approaches behind that score and then finish with a different way to look at what the market might be pricing in.
Find out why Magna International’s 26.7% return over the last year is lagging behind its peers.
A Discounted Cash Flow, or DCF, model estimates what a business might be worth today by projecting its future cash flows and then discounting those cash flows back to a present value.
For Magna International, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The company’s latest twelve month free cash flow stands at about $1.47b. Analyst inputs are available up to 2028, for example a projected free cash flow of $1.24b in 2028, and Simply Wall St extrapolates the remaining years out to 2035 using a smoother path of estimates.
Bringing all those projected cash flows back to today’s value produces an estimated intrinsic value of $93.81 per share. Compared with the recent share price of US$69.61, the DCF output indicates a 25.8% discount, meaning that Magna International currently appears undervalued based on this model alone.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Magna International is undervalued by 25.8%. Track this in your watchlist or portfolio, or discover 877 more undervalued stocks based on cash flows.
For a profitable company like Magna International, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It links directly to the bottom line, which is ultimately what supports dividends and buybacks over time.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher expected earnings growth or lower perceived risk can support a higher P/E, while weaker growth or higher uncertainty tends to justify a lower multiple.
Magna International currently trades on a P/E of 13.95x. That sits below the Auto Components industry average P/E of 20.40x and the peer group average of 24.83x. Simply Wall St also uses a proprietary “Fair Ratio” for the P/E, which estimates the multiple that might be appropriate after considering factors such as earnings growth, the company’s industry, profit margins, market value and key risks.
This Fair Ratio can be more informative than a simple comparison with peers or the industry, because it adjusts for company specific features rather than assuming one size fits all. In Magna International’s case, the Fair Ratio sits above the current 13.95x, which points to the shares trading below that modelled level.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1420 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which simply means putting your own story about Magna International behind the numbers such as fair value, and your assumptions for future revenue, earnings and margins.
A Narrative connects what you believe about the company, for example its role in global auto production and electrification themes, to a financial forecast and then to a fair value per share that you can compare with the current price to help you decide whether it might be time to buy, hold or sell.
On Simply Wall St, Narratives sit inside the Community page, where millions of investors use them as an accessible tool that automatically updates when new information such as news or earnings arrives, so your story and fair value stay aligned with the latest data without extra work.
For Magna International, one investor might build a Narrative that sees a relatively high fair value based on confidence in free cash flow and electrification exposure, while another might land on a much lower fair value if they focus more on industry risk and execution uncertainty, and the platform allows you to see and compare both views side by side.
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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