BUY BUY BUY BUY: Magna International Inc

July 16, 2017
NYSE: MGA
MAGNA INTERNATIONAL INC

BUY HOLD SELL
BUY
RATING SINCE 04/06/2016
A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F TARGET PRICE $55.41
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$1.10 2.29% 1.43 $18.3 Billion $36.27-$48.27 $47.97
Sector: Consumer Goods & Svcs Sub-Industry: Auto Parts & Equipment Source: S&P
Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
MGA BUSINESS DESCRIPTION
Magna International Inc. designs, develops, and 58
manufactures automotive systems, assemblies, TARGET
TARGET
TARGETPRICE
TARGET PRICE
PRICE$55.41
$55.41
$55.41 55
modules, and components in North America, 53
Europe, Asia, and South America.
50
STOCK PERFORMANCE (%) 48
3 Mo. 1 Yr. 3 Yr (Ann) 45
Price Change 21.19 29.61 -4.47 43
40
GROWTH (%)
Last Qtr 12 Mo. 3 Yr CAGR 38
Revenues 5.30 10.98 1.86 35
Net Income 19.10 4.16 10.26 33
EPS 25.40 13.25 16.05 Rating History
BUY BUY
RETURN ON EQUITY (%)
Volume in Millions
MGA Ind Avg S&P 500 40
Q1 2017 20.54 26.26 13.16
Q1 2016 20.97 29.09 11.83 20
Q1 2015 23.09 31.85 13.71
0
2015 2016 2017
P/E COMPARISON COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
RECOMMENDATION
We rate MAGNA INTERNATIONAL INC (MGA) a BUY. This is driven by a number of strengths, which we
believe should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
revenue growth, solid stock price performance, growth in earnings per share, increase in net income and
attractive valuation levels. We feel its strengths outweigh the fact that the company has had somewhat
disappointing return on equity.
8.77 19.66 24.41
MGA Ind Avg S&P 500 HIGHLIGHTS
MGA's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year
prior, revenues slightly increased by 5.3%. Growth in the company's revenue appears to have helped boost
EPS ANALYSIS¹ ($) the earnings per share.
Powered by its strong earnings growth of 25.40% and other important driving factors, this stock has surged by
29.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the
stock's future course, although almost any stock can fall in a broad market decline, MGA should continue to
move higher despite the fact that it has already enjoyed a very nice gain in the past year.
MAGNA INTERNATIONAL INC has improved earnings per share by 25.4% in the most recent quarter
Q1 1.10
Q2 1.29
Q3 1.13
Q4 1.19
Q1 1.22
Q2 1.41
Q3 1.29
Q4 1.24
Q1 1.53
compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per
share growth over the past two years. We feel that this trend should continue. During the past fiscal year,
2015 2016 2017 MAGNA INTERNATIONAL INC increased its bottom line by earning $5.16 versus $4.71 in the prior year. This
NA = not available NM = not meaningful
year, the market expects an improvement in earnings ($5.75 versus $5.16).
1 Compustat fiscal year convention is used for all fundamental
data items. The net income growth from the same quarter one year ago has significantly exceeded that of the Auto
Components industry average, but is less than that of the S&P 500. The net income increased by 19.1% when
compared to the same quarter one year prior, going from $492.00 million to $586.00 million.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 1
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
July 16, 2017
NYSE: MGA

Sector: Consumer Goods & Svcs Auto Parts & Equipment Source: S&P
$1.10 2.29% 1.43 $18.3 Billion $36.27-$48.27 $47.97
PEER GROUP ANALYSIS INDUSTRY ANALYSIS

REVENUE GROWTH AND EBITDA MARGIN*
The automobile components industry includes original equipment manufacturers, after-market parts
manufacturers and tire producers. The industry includes more than 5,000 US companies with around 6,000
20%
LCII
operational factories, generating annual revenue of about $200 billion. The industry is cyclical and highly
FA
concentrated. Key players include Johnson Control (JCI), Visteon (VC), Magna International (MGA), and
VO
Goodyear Tire and Rubber (GT).

RA
BL
E
The various product categories include specialized interchangeable components and systems engineered for
MGA BWA specific applications, which are usually sold under long-term contracts since they require significant
GNTX research and development. Tire producers are considered hybrids because they often cater to original
ALV DLPH equipment manufacturers (OEMs) and to the after-market.
Revenue Growth (TTM)
DORM
TEN Overall demand for auto parts is driven by new car sales, which in turn is influenced by interest rates and the
replacement market. Since most expenditure remains constant, profitability depends on two factors, product
UN
LEA DAN
FA
specialization and operational capacity utilization. In order to compete with large companies, smaller
VO
-2.5%
companies need to focus on a limited number of product lines and cater to niche markets with technically
RA
B
superior products. The industry’s structure is complex, with smaller companies (referred to as "tier 2" and "tier
LE
5% VC 40% 3" suppliers) selling parts to larger suppliers, referred to as "tier 1" suppliers. The tier 1 suppliers in turn sell
EBITDA Margin (TTM) component assemblies or modules to automobile assemblers such as General Motors (GM) and Ford Motor
Companies with higher EBITDA margins and Company (F).
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth The next few years pose significant challenges to auto suppliers in North America. Demand for automotive
rates. Companies for this scatter plot have a market components has declined in recent years along with OEM sales. Production volumes for Detroit’s big three
capitalization between $2.5 Billion and $24.6 Billion. automakers have dropped by an annual average of 2% over the past decade. Such declines amplify the
Companies with NA or NM values do not appear. adverse impact of existing operational shortcomings. Intense competition from suppliers in China, India and
other low-cost countries is pressurizing margins at a time when prices for key inputs such as steel and
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization. aluminum have reached historical highs. Even large suppliers are strained to pass along these cost increases
to automakers.
REVENUE GROWTH AND EARNINGS YIELD
Since 2001, about one-third of the region’s 25 largest auto suppliers (by revenues) have filed for bankruptcy
20%
LCII protection and many continue to struggle. Suppliers are trying hard to boost operational efficiencies, but are
limited by their bargaining power on prices with OEMs.
FA
VO
RA
BL
PEER GROUP: Auto Components

E
Recent Market Price/ Net Sales Net Income

BWA MGA Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
DLPH ALVGNTX MGA MAGNA INTERNATIONAL INC 47.97 18,284 8.77 36,917.00 2,125.00
BWA BORGWARNER INC 46.20 9,805 71.08 9,209.40 143.60
Revenue Growth (TTM)
DORM
TEN GNTX GENTEX CORP 18.11 5,202 14.37 1,726.89 364.87
DAN DANA INC 23.55 3,404 5.12 6,078.00 670.00
UN
LEA DAN
FA
VC VISTEON CORP 105.33 3,346 25.63 3,169.00 119.00

VO
-2.5%
RA
TEN TENNECO INC 59.74 3,229 9.07 8,755.00 369.00

BLE
0%
VC 20% DORM DORMAN PRODUCTS INC 76.09 2,610 23.78 873.08 110.57
LCII LCI INDUSTRIES 101.20 2,520 18.53 1,754.44 136.86
Earnings Yield (TTM)
DLPH DELPHI AUTOMOTIVE PLC 91.78 24,587 21.44 16,902.00 1,167.00
Companies that exhibit both a high earnings yield
and high revenue growth are generally more LEA LEAR CORP 149.04 10,267 10.36 18,893.20 1,032.50
attractive than companies with low revenue growth ALV AUTOLIV INC 115.73 10,222 17.72 10,251.70 577.80
and low earnings yield. Companies for this scatter The peer group comparison is based on Major Auto Parts & Equipment companies of comparable size.
plot have revenue growth rates between -1.9% and
19.8%. Companies with NA or NM values do not
appear.
July 16, 2017
NYSE: MGA

$1.10 2.29% 1.43 $18.3 Billion $36.27-$48.27 $47.97
COMPANY DESCRIPTION STOCK-AT-A-GLANCE

Magna International Inc. designs, develops, and Below is a summary of the major fundamental and technical factors we consider when determining our
manufactures automotive systems, assemblies, modules, overall recommendation of MGA shares. It is provided in order to give you a deeper understanding of our
and components in North America, Europe, Asia, and rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
South America. The company offers engineering and important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
contract manufacturing services, and fuel systems; understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
electric/electronic components and systems; roof valuation. Please refer to our Valuation section on page 5 for further information.
systems comprising softtops, retractable hardtops,
modular tops, and hardtops; and closures, including FACTOR SCORE
latching systems, hinges and wire forming, power
closures, electronics, door modules, window systems Growth out of 5 stars 5.0
engineered glass, sealing, trim and roof racks, roof Measures the growth of both the company's income statement and weak strong
systems, testing centers, and running boards. It also cash flow. On this factor, MGA has a growth score better than 90% of
provides interior and exterior mirrors, actuators, the stocks we rate.
electronic vision systems, door handle and overhead
console technologies, and front and signal lightings;
complete seating systems, mechanism solutions, seat
Total Return out of 5 stars 3.0
structure solutions, foam and trim products, and design Measures the historical price movement of the stock. The stock weak strong
and development solutions; and fascia and exterior trims, performance of this company has beaten 50% of the companies we
liftgate and exterior modules, front end modules, cover.
ACTERO active aerodynamics, and lightweight
composites. In addition, the company offers driveline Efficiency out of 5 stars 5.0
systems, fluid pressure and controls, metal-forming Measures the strength and historic growth of a company's return on weak strong
solutions; and body systems, chassis systems, and invested capital. The company has generated more income per dollar of
renewable energy systems. It serves original equipment capital than 90% of the companies we review.
manufacturers, tier 1, medium and heavy truck, and
non-automotive customers. The company was founded in
1957 and is headquartered in Aurora, Canada.
Price volatility out of 5 stars 3.0
Measures the volatility of the company's stock price historically. The weak strong
MAGNA INTERNATIONAL INC stock is less volatile than 50% of the stocks we monitor.
337 Magna Drive
Aurora, ON L4G7K1 Solvency out of 5 stars 5.0
CAN Measures the solvency of the company based on several ratios. The weak strong
Phone: 905-726-2462 company is more solvent than 90% of the companies we analyze.
http://www.magna.com
Income out of 5 stars 4.0
Measures dividend yield and payouts to shareholders. The company's weak strong
dividend is higher than 70% of the companies we track.
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
July 16, 2017
NYSE: MGA

$1.10 2.29% 1.43 $18.3 Billion $36.27-$48.27 $47.97
Consensus EPS Estimates² ($) FINANCIAL ANALYSIS

IBES consensus estimates are provided by Thomson Financial MAGNA INTERNATIONAL INC's gross profit margin for the first quarter of its fiscal year 2017 has increased
when compared to the same period a year ago. The company managed to grow both sales and net income at
a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year
ago. MAGNA INTERNATIONAL INC has weak liquidity. Currently, the Quick Ratio is 0.88 which shows a lack
of ability to cover short-term cash needs. The company's liquidity has increased from the same period last
year, indicating improving cash flow.
During the same period, stockholders' equity ("net worth") has increased by 9.39% from the same quarter last
1.47 5.75 E 6.51 E year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
Q2 FY17 2017(E) 2018(E) difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
INCOME STATEMENT next 12-months. To learn more visit www.TheStreetRatings.com.
Q1 FY17 Q1 FY16
Net Sales ($mil) 9,372.00 8,900.00
EBITDA ($mil) 1,035.00 889.00
EBIT ($mil) 761.00 643.00
Net Income ($mil) 586.00 492.00
BALANCE SHEET
Q1 FY17 Q1 FY16
Cash & Equiv. ($mil) 1,028.00 625.00
Total Assets ($mil) 23,573.00 22,380.00
Total Debt ($mil) 3,034.00 3,161.00
Equity ($mil) 10,343.00 9,455.00
PROFITABILITY
Q1 FY17 Q1 FY16
Gross Profit Margin 15.48% 14.39%
EBITDA Margin 11.04% 9.98%
Operating Margin 8.12% 7.22%
Sales Turnover 1.57 1.49
Return on Assets 9.01% 9.11%
Return on Equity 20.54% 20.97%
DEBT
Q1 FY17 Q1 FY16
Current Ratio 1.21 1.19
Debt/Capital 0.23 0.25
Interest Expense 19.00 23.00
Interest Coverage 40.05 27.96
SHARE DATA
Q1 FY17 Q1 FY16
Shares outstanding (mil) 380 397
Div / share 0.28 0.25
EPS 1.53 1.22
Book value / share 27.20 23.84
Institutional Own % NA NA
Avg Daily Volume 1,638,350 1,307,857
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
July 16, 2017
NYSE: MGA

$1.10 2.29% 1.43 $18.3 Billion $36.27-$48.27 $47.97
RATINGS HISTORY VALUATION

Our rating for MAGNA INTERNATIONAL INC has BUY. MAGNA INTERNATIONAL INC's P/E ratio indicates a significant discount compared to an average of
not changed since 4/6/2016. As of 7/13/2017, the 19.66 for the Auto Components industry and a significant discount compared to the S&P 500 average of 24.41.
stock was trading at a price of $47.97 which is .6% To use another comparison, its price-to-book ratio of 1.76 indicates a discount versus the S&P 500 average of
below its 52-week high of $48.27 and 32.3% above 3.04 and a significant discount versus the industry average of 4.07. The price-to-sales ratio is well below both
its 52-week low of $36.27. the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other
key valuation criteria, MAGNA INTERNATIONAL INC proves to trade at a discount to investment alternatives
2 Year Chart within the industry.
$60
BUY: $56.23
HOLD: $35.51
BUY: $40.99
Price/Earnings 1 2 3 4 5 Price/CashFlow 1 2 3 4 5
$50 premium discount premium discount
MGA 8.77 Peers 19.66 MGA 5.17 Peers 11.98
$40 • Discount. A lower P/E ratio than its peers can • Discount. The P/CF ratio, a stock’s price divided by
signify a less expensive stock or lower growth the company's cash flow from operations, is useful
expectations. for comparing companies with different capital
2015 2016 • MGA is trading at a significant discount to its peers. requirements or financing structures.
• MGA is trading at a significant discount to its peers.
MOST RECENT RATINGS CHANGES

Price/Projected Earnings 1 2 3 4 5 Price to Earnings/Growth 1 2 3 4 5
premium discount premium discount
Date Price Action From To MGA 7.37 Peers 12.30 MGA 0.77 Peers 0.77
4/6/16 $40.99 Upgrade Hold Buy • Discount. A lower price-to-projected earnings ratio • Average. The PEG ratio is the stock’s P/E divided by
2/22/16 $35.51 Downgrade Buy Hold than its peers can signify a less expensive stock or the consensus estimate of long-term earnings
7/13/15 $56.23 No Change Buy Buy lower future growth expectations. growth. Faster growth can justify higher price
Price reflects the closing price as of the date listed, if available • MGA is trading at a significant discount to its peers. multiples.
• MGA trades at a valuation on par to its peers.
RATINGS DEFINITIONS & Price/Book 1 2 3 4 5 Earnings Growth 1 2 3 4 5

premium discount lower higher
DISTRIBUTION OF THESTREET RATINGS
MGA 1.76 Peers 4.07 MGA 13.25 Peers 67.10
(as of 7/13/2017)
• Discount. A lower price-to-book ratio makes a • Lower. Elevated earnings growth rates can lead to
43.81% Buy - We believe that this stock has the stock more attractive to investors seeking stocks capital appreciation and justify higher
opportunity to appreciate and produce a total return of with lower market values per dollar of equity on the price-to-earnings ratios.
more than 10% over the next 12 months. balance sheet. • However, MGA is expected to significantly trail its
• MGA is trading at a significant discount to its peers. peers on the basis of its earnings growth rate.
30.69% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
Price/Sales 1 2 3 4 5 Sales Growth 1 2 3 4 5
premium discount lower higher
shares at this time and that its likelihood of positive total MGA 0.49 Peers 1.03 MGA 10.98 Peers 8.99
return is roughly in balance with the risk of loss.
• Discount. In the absence of P/E and P/B multiples, • Higher. A sales growth rate that exceeds the
the price-to-sales ratio can display the value industry implies that a company is gaining market
25.50% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with investors are placing on each dollar of sales. share.
the risk involved too great to compensate for any • MGA is trading at a significant discount to its • MGA has a sales growth rate that exceeds its
possible returns. industry on this measurement. peers.
DISCLAIMER:
TheStreet Ratings
14 Wall Street, 15th Floor The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
New York, NY 10005 via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
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Research Contact: 212-321-5381
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BUY BUY BUY BUY: Magna International Inc

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July 16, 2017

MAGNA INTERNATIONAL INC

MAGNA INTERNATIONAL INC

PEER GROUP ANALYSIS INDUSTRY ANALYSIS

Goodyear Tire and Rubber (GT).

PEER GROUP: Auto Components

Recent Market Price/ Net Sales Net Income

VC VISTEON CORP 105.33 3,346 25.63 3,169.00 119.00

TEN TENNECO INC 59.74 3,229 9.07 8,755.00 369.00

MAGNA INTERNATIONAL INC

COMPANY DESCRIPTION STOCK-AT-A-GLANCE

THESTREET RATINGS RESEARCH METHODOLOGY

MAGNA INTERNATIONAL INC

Consensus EPS Estimates² ($) FINANCIAL ANALYSIS

MAGNA INTERNATIONAL INC

RATINGS HISTORY VALUATION

MOST RECENT RATINGS CHANGES

RATINGS DEFINITIONS & Price/Book 1 2 3 4 5 Earnings Growth 1 2 3 4 5

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