Magna International Inc (MG)

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.  Download

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.