Is Magna International Inc (NYSE:MGA) Undervalued?

By
Simply Wall St
Published
December 30, 2017
NYSE:MGA

Let's talk about the popular Magna International Inc (NYSE:MGA). The company's shares saw its share price hover around a small range of CA$52.82 to CA$57.83 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the 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 there are any catalysts for a price change. Check out our latest analysis for Magna International

Is Magna International still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Magna International today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth CA$67.18, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Magna International’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Magna International generate?

NYSE:MGA Future Profit Dec 31st 17
NYSE:MGA Future Profit Dec 31st 17
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 26.86% over the next couple of years, the future seems bright for Magna International. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in Magna International’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on Magna International, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Magna International. You can find everything you need to know about Magna International in the latest infographic research report. If you are no longer interested in Magna International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St has no position in any of the companies mentioned. This article is general in nature. 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.
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