Down 16% in a Year, Is Magna Stock a Buy, Hold, or Sell?

Magna (TSX:MG) stock has fallen 16% in the last year but has started to climb recently. So, is it time to buy, or is more volatility ahead?

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Magna International (TSX:MG) shares have been slowly recovering over the last few months. However, it’s important that investors look back a bit to see that shares are still down from 52-week highs, which occurred in January of 2023.

Today, with shares still down 16% from those highs, is the company a buy? Or should investors consider selling it as shares climb higher, in case volatility comes our way again? Let’s take a look.

Earnings look

Investors can first check out earnings to see how Magna stock has fared over the last while. During the company’s third-quarter results, Magna stock announced sales increased 15% year over year to $10.7 billion. That’s compared to just 4% at the same time last year. Furthermore, diluted earnings per share hit $1.37, with adjusted diluted earnings per share up 33% to $1.46.

As sales continue to increase, the stock managed to increase its outlook guidance for the year. In 2023, the company now expects light vehicle production to see an increase in Europe and China. While North America should hit 15.2 million units, there was an increase from 17 to 17.6 million in Europe and from 26.2 to 27.1 million in China.

Furthermore, total sales are also more focused, seeing between $42.1 and $43.1 million compared to between $41.9 and $43.5 million announced earlier in the year. Magna stock’s adjusted earnings before interest and taxes margin also increased from between 4.9% and 5.3% to 5.1% and 5.4%. Finally, adjusted net income should also increase to between $1.55 and $1.65 billion from $1.4 to $1.6 billion. All in all, there were some impressive upgrades for the stock.

Analysts weigh in

Magna stock is now seen as a strong performer in the future, yet analysts weren’t completely sold on the future of the stock — especially in the immediate future. One downgraded the stock to “neutral” from “outperformer.” This was to reflect a broader thesis about the electric vehicle (EV) industry in 2024.

Magna stock has been making some large investments into EVs. This exposure may put it at more risk in 2024, as the adoption of EVs has certainly slowed in the last year. Furthermore, it continues to trade on a level with historic norms in terms of its fundamentals. So, it’s not exactly a steal at this rate.

That being said, this broader view of the EV industry may be short term. It’s then caused other analysts to remain positive about the stock. So, if you’re a patient investor, could now be the time to get in?

What you could get

So, let’s say we see Magna stock through 2024. The stock starts to recover back to 2023 highs, but it takes the larger part of the year. Honestly, in my view, that could make today’s purchase a great deal. The potential upside should the stock rise back to about $92 per share, which is at 8% as of writing. Add onto that a dividend yield currently at 3.26% as of writing as well.

Altogether, Magna stock does look like it’s going to have a solid future ahead. Does it look like a screaming buy? Perhaps not. But patient investors could certainly see some strong returns in the fairly near future. Honestly, for now, I would hold off until earnings come out next quarter. Until then, time will tell!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.

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