Magna International (TSX:MG): Assessing Valuation Following New European EV Contract with XPENG

Magna International (TSX:MG) just signed a new assembly contract with XPENG for the European market, sharpening its focus on electric vehicles. This move highlights the company's strategic expansion and could influence its future revenue streams.

See our latest analysis for Magna International.

Magna’s latest European deal adds momentum to a year of steady improvement, with its 1-year total shareholder return at 17.05% thanks to strengthening core operations and a recovering auto sector. While short-term performance has bounced around, long-term growth signals are building as the company leans further into EVs.

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With strong operational gains and new EV contracts fueling growth, is Magna trading at an attractive valuation for investors? Or has the market already incorporated all the good news into the current share price?

Most Popular Narrative: 6.3% Undervalued

With Magna's last close at CA$63.14 and a fair value narrative set at CA$67.39, the market is not fully pricing in new growth and operational momentum. Here is a highlight that underpins the valuation perspective held by the majority of coverage.

The company anticipates significant improvements in free cash flow due to the normalization of capital spending, particularly now that investments in battery enclosure assembly are behind them. Reduced CapEx will likely enhance free cash flow generation.

Read the complete narrative.

Want a sneak peek at the financial drivers behind this higher price target? The answer lies in bolder profit margins, operational improvements, and a strategic geographic pivot. The exact mix of forecasts may surprise you. Unlock the story before the rest of the market catches on.

Result: Fair Value of $67.39 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing macro challenges such as lower-than-expected vehicle production and persistent foreign exchange headwinds could put pressure on Magna's revenue growth and profitability.

Find out about the key risks to this Magna International narrative.

Build Your Own Magna International Narrative

If you want to dig deeper or come to your own conclusions, you can piece together your personal view using our tools in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 4 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.

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