Does Magna International’s 15% 2025 Rally Reflect Its True Value After New EV Partnerships?

• Wondering if Magna International is a hidden value gem or already fully priced? You are not alone, as the stock continues to attract attention from investors seeking both growth stories and bargains.
• Magna's share price has climbed 15.0% year-to-date and delivered a solid 12.7% gain over the last year, with a notable 7.7% push in the last month, sparking fresh interest in its upside potential.
• Recently, industry headlines have focused on Magna expanding its electric vehicle (EV) partnerships and restructuring some of its operations to enhance profitability. These developments have fueled optimism about the company's ability to adapt and capture new opportunities, helping explain the recent share price momentum.
• According to the latest valuation review, Magna scores a 4 out of 6 on our value checks, suggesting the stock passes most—but not all—of the most important undervaluation metrics (see score breakdown). Here is a closer look at how Magna compares with standard valuation methods, along with a different perspective on assessing value at the end of this article.

Find out why Magna International's 12.7% return over the last year is lagging behind its peers.

Approach 1: Magna International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach aims to capture the value of all cash Magna International is expected to generate in the years ahead, providing a data-driven look at long-term potential.

According to the latest figures, Magna International reported trailing twelve month free cash flow of $1.47 Billion. Analyst projections anticipate modest growth, with free cash flow expected to reach approximately $1.31 Billion by the end of 2028. Beyond the first five forecasted years, Simply Wall St extrapolates further cash flows out to 2035, maintaining this steady trajectory.

Based on this 2 Stage Free Cash Flow to Equity model, Magna’s intrinsic value is estimated at $100.82 per share. With a current price trading at a 32.2% discount to this level, the analysis suggests the stock is meaningfully undervalued at present.

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.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Magna International.

Approach 2: Magna International Price vs Earnings

The price-to-earnings (PE) ratio is widely used to value established, profitable companies like Magna International, as it directly reflects how much investors are willing to pay for each dollar of current earnings. It is a useful shortcut for gauging whether a stock appears expensive or reasonably priced relative to its earnings potential.

Growth expectations and perceived risk play large roles in what is considered a "normal" or "fair" PE ratio. Companies with solid growth prospects and lower risk profiles generally deserve a higher PE, while slower-growing or riskier companies tend to trade at a lower multiple.

At the moment, Magna trades at a PE ratio of 13.4x. This is notably below the Auto Components industry average of 20.0x and also under the peer average of 24.7x. On the surface, this suggests Magna is valued more conservatively than most of its competitors.

Simply Wall St's “Fair Ratio” refines this analysis by calculating a custom benchmark based on Magna’s specific outlook, including earnings growth, profit margins, industry environment, market cap, and risk profile. Unlike simple peer or industry comparisons, the Fair Ratio provides a more accurate measure of what a reasonable valuation should look like for this particular company.

Comparing Magna’s actual PE of 13.4x with the proprietary Fair Ratio, the difference is negligible and indicates the stock is trading close to its fair value based on fundamental drivers. This suggests that while Magna is cheaper than its industry peers, the current valuation accurately reflects its growth and risk profile.

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.

Upgrade Your Decision Making: Choose your Magna International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, yet powerful way to summarize your perspective on a company by connecting its story, your forecasts for things like revenue and earnings, and what you believe is a fair value for the stock, all in one place. Narratives link the big ideas driving a business, such as new electric vehicle partnerships or expanding into Asia, directly to financial outcomes and a real-life estimate of what the shares are worth today.

On Simply Wall St's platform, Narratives are an easy, accessible tool used by millions of investors on the Community page. They help you decide when to buy or sell by showing how your Fair Value compares to the current Price. Since they are updated dynamically as new information (like earnings results or major news) comes in, your Narrative always reflects the latest picture.

For Magna International, one investor’s Narrative might highlight optimism around steady margins and expansion in China, setting a Fair Value of CA$80.21, while another might focus on industry uncertainty and foreign exchange risks, settling on a more conservative CA$54.51. This means you can always compare your own story and numbers against the crowd, making investment decisions more transparent and tailored to your outlook.

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.

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