Yahoo Finance When Should You Buy Magna International Inc. (TSE:MG)?
Magna International Inc. (TSE:MG) saw significant share price movement during recent months on the TSX, rising to highs of CA$78.90 and falling to the lows of CA$69.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Magna International's current trading price of CA$69.28 reflective of the actual 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.
View our latest analysis for Magna International
What's The Opportunity In Magna International?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Magna International’s ratio of 12x is trading slightly above its industry peers’ ratio of 10.3x, which means if you buy Magna International today, you’d be paying a relatively reasonable price for it. And if you believe that Magna International should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. 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.
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. With profit expected to grow by 95% over the next couple of years, the future seems bright for Magna International. It looks like higher cash flow 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 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 financial strength of the company. Have these factors changed since the last time you looked at MG? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye 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.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.
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.
