Should You Think About Buying Magna International Inc. (TSE:MG) Now?

Magna International Inc. (TSE:MG) saw a significant share price rise of 21% in the past couple of months on the TSX. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Magna International’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Magna International

Is Magna International Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.08x is currently trading slightly above its industry peers’ ratio of 10.77x, which means if you buy Magna International today, you’d be paying a relatively sensible price for it. And if you believe Magna International should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Magna International’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Magna International?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Magna International's earnings over the next few years are expected to increase by 95%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in MG’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at MG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on MG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for MG, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Magna International has 1 warning sign we think you should be aware of.

If you are no longer interested in Magna International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.