I do not own this stock. However, I did own it briefly between 2002 and 2006 and made a total return of 4.65% per year. I have followed this stock for a number of years, although I have only blogged about this stock once before.
When I look at insider trading, I find that there is some $925.6M of insider selling. The thing is that Frank Stronach has been selling his shares. A good sign is that there is some $31M of insider buying, which is probably a good sign. However, I must admit, I cannot figure out who is buying. Both the CEO and CFO have a few million in shares. This is good. The last thing to notice is that insiders, except for the directors, have lots more options than shares.
When you look at what institutions have been doing over the past 3 months, I find that 346 institutions own around 77% of this stock. There has been a lot of buying and selling within the last 3 months by institutions and they have, overall, reduced their investment in the company by 3.5%.
I get 5 year median low Price/Earnings Ratio of 13.85 and a 5 year high P/E Ratio of 16.75. By this test, the current P/E Ratio of 7.82 is rather low. Even the 10 year low median P/E is higher at 11.09. The current dividend yield is 2.88% and this higher than the 5 year median of 1.25%. Even in US$, current yield of 2.91% is higher than the 5 year median yield of 1.43%. Both these tests show a good current stock price.
I get a Graham Price of $60.03. The current stock price of $34.63 is some 42% lower. The difference between the Graham Price and the low stock price over the past 10 years is the stock price being only some 24% lower than the Graham Price.
The last test to look at today is the Price/Book Value Ratio. The 10 year median P/B Ratio is 1.19. The current P/B Ratio is just 0.96. The current one is 80% of the 10 year median and this low ratio points to a good current price. Also, a P/B ratio of below 1.00 points to a good current price, as the stock is selling below the book value of the stock.
All my tests points to this stock being beaten up. There would seem no reason for this except that people feel we are going into a recession. The company has good debt ratios and good Dividend Payout Ratios. (See my site for information on Dividend Payout Ratios and see my site for further information on Debt Ratios.)
The company seems optimistic as it has just raised dividends by 40%. In fact dividends payable in 2011 are up over 138% compared dividends paid in 2010. The earnings estimates for this year are higher than last year’s earnings. Cash Flow is not estimated to be higher, but it is expected to be better than in the recent past.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would a Buy. It would seem that analysts with Hold recommendations fear a double dip recession or a slowdown in the economy. The Buy and Strong Buy recommendations only talk about this stock being beaten down and the fact that it has a strong balance sheet.
This has been a strong company with Frank Stronach running it. However, is it past the time for automobile companies to make money? Will they do just as well without Frank Stronach? You have to wonder. Personally, this stock is not on my radar at present. I wonder if the world economy will do well until Europe starts to fix their problems. However, I must admit that the company does have a strong balance sheet and it is cheap.
Magna International is the most diversified global automotive supplier. They design, develop and manufacture technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers ("OEMs") of cars and light trucks. Their capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; hybrid and electric vehicles/systems; as well as complete vehicle engineering and assembly. Its web site is here Magna. See my spreadsheet at mg.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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