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Magna International (TSX:MG) has drawn fresh attention after recent share price moves, with the stock up 2.3% over the past day and 6% over the past week, but lower over the month.
See our latest analysis for Magna International.
Looking beyond the recent bounce, Magna’s share price return over the past 90 days is 7.05%. The year-to-date share price return is slightly negative, yet the 1 year total shareholder return of 40.30% suggests momentum has recently been stronger for long term holders than short term traders.
If Magna’s moves have you thinking about where capital could work next, it might be worth scanning our screener of 4 top founder-led companies for fresh ideas beyond the auto sector.
Magna trades below one estimate of intrinsic value, yet sits above the average analyst price target. The key question now is whether the current price leaves room for upside or already reflects future growth expectations.
At a last close of CA$73.80 versus a most followed fair value estimate of CA$69.18, Magna’s current price sits modestly above that narrative line in the sand, which is built using an 8.29% discount rate.
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.
Curious what kind of margin rebuild sits behind that fair value, and how earnings, revenue and the future P/E are stitched together? The narrative leans on a specific path for profitability, a measured revenue line, and a lower earnings multiple than many peers. If you want to see exactly how those moving parts combine to reach CA$69.18, the full story is worth a look.
Result: Fair Value of CA$69.18 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, that story can change quickly if vehicle production in key regions remains soft or if foreign exchange moves further against Magna’s main reporting currencies.
Find out about the key risks to this Magna International narrative.
While the analyst narrative pegs Magna as about 7% overvalued at CA$73.80 versus a CA$69.18 fair value, our DCF model comes to a very different conclusion. On that approach, Magna trades at roughly a 22% discount to an estimated future cash flow value of CA$94.25. So which lens do you trust more: earnings multiples or long range cash flows?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Magna International for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 8 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If your view of Magna’s prospects does not quite line up with these models, you can reshape the assumptions in minutes and Do it your way
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Magna International.
If you are serious about putting your cash to work, do not stop at one stock. Use the tools that surface opportunities you might otherwise miss.
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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