In this week’s content analysis, we’re going to take a closer look at the results of Magna International’s Q4 2014 financial statements, recently updated in StockPointer. Magna has been a constituent of our Canadian model portfolio since January 2nd, 2012, when it started to stand out through its stable EVA growth. 
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While Magna’s Intrinsic Value remained relatively stable over the course of 2014, even decreasing slightly from $140 to $135, the company finished the year strong in its 4th quarter, producing its highest return on capital in five years. This improvement in return on capital (from 16.2% in 2013, to 18.8% in 2014), was largely driven by a 28% one-year increase in NOPAT (net operating profit after tax). As a result, Intrinsic Value jumped from $138.30 to $176.03, improving the Price/IV ratio to 0.75, which now offers favorable growth potential.
Magna’s future growth value (FGV) increased to “only” 5.2% (as of March 10th, 2015), a multiple we consider to be very reasonable given a company having achieved such current operating value (COV) growth over the past 5 years.
As far as pure economic performance, Magna’s EVA continues to trend upwards along a stable, linear path.
Free cash flow has stayed positive since 2012 and was at over a billion dollars in 2014, which should allow the company to continue its share buy-backs and also support the dividend increase announced February 25th. Note as well that the company recently approved a 2-for-1 stock split.
