Magna International (TSX:MG) Margin Gains Reinforce Value Narrative Despite Below-Market Growth Outlook

Magna International (TSX:MG) delivered a net profit margin of 2.9%, up from 2.3% last year, as earnings grew 22.8% over the past year, reversing a five-year annual decline of -2%. Looking ahead, the company forecasts annual earnings growth of 4.21% and revenue growth of 2.1%, both slower than the broader Canadian market averages.

See our full analysis for Magna International.

Next, we will see how Magna’s latest numbers compare with the key narratives investors follow, highlighting where the data aligns and where it challenges the dominant storylines.

See what the community is saying about Magna International

Margin Expansion Beats Soft Top-Line

• Net profit margin climbed from 2.3% to 2.9%, reinforcing analysts' view that operational excellence and restructuring are driving a rebuilding of profitability, even as annual revenue growth guidance trails Canadian averages.
• Analysts' consensus highlights how meaningful margin gains could continue, noting expected improvement from 2.4% today to 4.0% by 2028.
  • This supports the theme that cost discipline and normalization of capital spending may drive higher free cash flow.
  • Consensus narrative points to actions like new program launches and "Factory of the Future" initiatives as critical levers for boosting operating income, with margin performance outpacing the company's modest revenue forecast.
• For a deeper read on what’s powering these gains and the push toward higher margins, check where the consensus storyline leads. 📊 Read the full Magna International Consensus Narrative.

Valuation Discount Stands Out

• Magna trades at 11x earnings, well under the North American auto components industry average of 18.7x and peer average of 22.2x, and its current share price of CA$66.26 remains significantly below its DCF fair value of CA$93.28.
• Consensus narrative underscores how this valuation gap could offer upside for value-focused investors, even with slower forecasted growth.
  • Bulls would note that industry and discounted cash flow metrics both support the stock being inexpensive on relative and absolute terms.
  • Bears might counter that such a discount reflects market skepticism about Magna’s ability to ramp up revenue or earnings to justify a multiple re-rating, reminding investors there is tension between strong margins and continued slow top-line growth.

Share Price Lags Analyst Targets

• Magna’s share price of CA$66.26 sits below the consensus analyst target of CA$67.39, implying 1.7% potential upside, and even further below DCF fair value.
• Consensus narrative suggests this moderate gap signals the market is cautiously weighing stable fundamentals and a modest profit outlook against limited growth excitement.
  • The most bullish analysts, expecting $1.9 billion in 2028 earnings, see more room for price appreciation if margin expansion delivers as forecast, while the most bearish remain concerned over macro headwinds and slower industry volumes.
  • Market watchers will be tracking whether profit guidance upgrades, especially from China or successful cost initiatives, are enough to push shares toward or above that target.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Magna International on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Have a fresh angle on the numbers? In just a few minutes, you can translate your unique perspective into your own narrative. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Magna International.

See What Else Is Out There

Despite improving margins, Magna’s slow revenue and earnings growth means it may lag behind peers who deliver steadier long-term performance.

If you want to focus on companies consistently growing earnings and revenue year after year, use our stable growth stocks screener (2103 results) to find more reliable opportunities now.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com