1 Value Stock Down 5.72% to Buy Right Now

A stock with long-term potential and down year-to-date is a buying opportunity for value investors right now.

| More on:
Automated machines

Image source: Getty Images

Some investors rebalance their stock portfolios at the start of the year. There’s also the January effect phenomenon, when stock prices, especially small-cap stocks, tend to rise or outperform during the month. However, for value investors, the search is on for companies trading below their actual values and with long-term potential.

One Canadian stock that deserves serious consideration right now is Martinrea International (TSX:MRE). At $13.52 per share, the stock is down nearly 6% year to date. Considering the 29% total return in 2023, the weakness is a buying opportunity. MRE also pays a modest 1.5% dividend.

Furthermore, Martinrea reported record results in Q3 2023 and expects an expansion in the automotive industry in the coming years. Market analysts covering the stock recommend a buy rating for the value stock.

Business overview

The $1.1 billion company from Vaughan is a fast-growing automotive parts supplier and a Tier One supplier in lightweight structures and propulsion systems. Martinrea’s reach is global, with sales and engineering centres in 10 countries across five continents.

Martinrea operates in a competitive landscape but stands out because of its high-quality products and strong commercial groups. The company takes pride in its manufacturing system, flexible build process, high-frequency delivery, and efficient material flow.

Management launched Project Breakthrough in 2019 intending to grow revenue and margins. Thus far, the project has been successful except for the losses in 2020, the COVID year.

Martinrea is forward-looking as it prepares to capitalize on the electrification growth opportunities in electric vehicles (EV), plug-in hybrid electric vehicles (PHEV), and internal combustion engine vehicles (ICE).

More importantly, Martinrea continues to win business awards from new and existing clients. After three quarters in 2023, total business awards reached $300 million in annualized sales.

Record quarterly results

In the three months ending September 30, 2023, total sales and net income rose 15.5% and 49.5% respectively to $1.4 billion and $53.7 million versus Q3 2022. Besides the $80 million new business awards during the quarter, free cash flow (FCF) reached $79.2 million; management projects hitting record FCF in the full year 2023.  

Fortunately, the strike of the United Auto Workers (UAW) employees in Detroit last year did not significantly impact the third quarter performance. “We continue to perform at a high level, our balance sheet is in great shape, and we are executing on our capital allocation priorities,” said Rob Wildeboer, executive chairman of Martinrea.

Wildeboer adds that management believes the automotive industry is stable, and volumes should expand in the coming years, especially in North America. The region’s economy is in good shape, the demand for vehicles remains high, and vehicle inventories are low. Interest rate cuts in 2024 could also boost the business.

Winning strategy

Warren Buffett, the GOAT of investing, is a proponent of value investing. The GOAT of investing identifies stocks trading at less than their intrinsic value but with long-term potential.

Unlike tech stocks, Martinrea may not be a high-flyer, although organic opportunities assure business growth and enhanced shareholder value. The fundamentals are solid and capable of generating quality earnings.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

question marks written reminders tickets
Dividend Stocks

Dividend Investors: Is BCE Stock a Buy Now?

BCE now offers a 7.9% dividend yield.

Read more »

edit Taxes CRA
Dividend Stocks

CRA Money: 2 More Days to Boost Your Tax Refund!

Dividend stocks like Toronto-Dominion Bank (TSX:TD) can be great RRSP holdings.

Read more »

grow money, wealth build
Dividend Stocks

3 TSX Dividend Stocks With Yields Above 7% (But Are They Safe?)

These three dividend stocks all have ultra-high yields, making them some of the best to buy if you're looking to…

Read more »

Light bulb with jester hat perched on top
Dividend Stocks

3 Canadian Dividend Stocks With Payouts That Are No Joke 

Here are three top Canadian dividend stocks long-term investors would be remiss to ignore, particularly at these current valuations.

Read more »

rail train
Dividend Stocks

Canadian National Railway Stock: Buy, Sell, or Hold?

Railways like Canadian National Railway (TSX:CNR) are great long-term options. But is now the time to buy Canadian National Railway…

Read more »

clock time
Dividend Stocks

Is it Too Late to Buy These 3 Brilliant Passive Income Stocks?         

TD Bank stock is just one of three stocks that are well positioned to continue to provide passive income for…

Read more »

analyze data
Dividend Stocks

3 Essential Benefits to Claim on Your 2023 Taxes

Be sure to claim the dividend tax credit on dividend stocks like Brookfield Asset Management (TSX:BAM).

Read more »

a person prepares to fight by taping their knuckles
Dividend Stocks

Better Buy: Brookfield Asset Management or Fairfax Financial Stock?

Both of these stocks are certainly strong. But when it comes right down to it, which offers the best deal…

Read more »