Better Buy in February 2024: Magna Stock vs. BCE Stock

Both Magna stock (TSX:MG) and BCE stock (TSX:BCE) have faced troublesome stock prices of late, but which is offering value?

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When it comes to their sectors, Magna International (TSX:MG) and BCE (TSX:BCE) are the biggest of the batch. Magna stock boasts a market cap of $21.2 billion as of writing, with BCE stock at $46.5 billion.

But if you’re looking for growth in the near future, and a long-term hold, both have their problems. The question is, can they make it out the other side? That’s why today we’re going to look at Magna stock and BCE stock, and see which is the better buy this month.

Looking into earnings

First, let’s look at how both Magna and BCE are performing in terms of earnings these days. Magna stock reported positive earnings during its most recent quarter. The company reported net income of $1.2 billion, which was about double what it earned during the same time last year. What’s more, diluted earnings per share hit $4.23.

The auto supplier has therefore been showing a huge improvement after being under the strain of supply-chain issues. The recovering automotive industry has certainly been a help, but economic uncertainty remains. So how did BCE stock hold up?

During recent earnings, the company reported $881 million in net income, up from $840 million the year before. Full-year 2023 brought in $3.4 billion, up from $3.3 billion the year before. Therefore, while there was some growth, overall the telco was relatively flat.

Future results

So when it comes to earnings, Magna stock looks to be the better buy. But this could be from macro performance, rather than anything the company is doing. Therefore, let’s turn our attention to future results for the companies.

Magna certainly has a positive outlook with strong market demand. Especially as electric vehicles (EV) hit the road. The company has shifted to focus more on electronic components, which are needed for both internal combustion engine (ICE) vehicles and EVs. Magna has also taken on cost-cutting initiatives to remain strong. Yet the outlook is mixed, as the potential for growth also faces supply-chain challenges.

As for BCE, it continues to hold the largest market cap of the telecommunications companies. However, more companies are edging in on its competition. It offers strong recurring revenue, and an increasing dividend. Yet with competition growing, it’s unclear where it might be in the future.

Bottom line

So which is it? For Magna, it holds a strong position in Canada with very high barriers for entry from competitors. Revenue growth also looks to climb alongside global industry growth. Large vendors like Magna are also looking to take advantage as suppliers continue to consolidate. The issue is that Magna still relies heavily on its top five customers. It’s also a cyclical stock, so could see drops during downturns. But overall, these aren’t issues that are done and dusted.

Meanwhile, BCE does have immediate future issues. While they won’t disappear, a lot of its market share could. It may boast a strong internet network and free cash generation, but so do its competitors. BCE’s top-line growth also lags behind peers. So even though it holds a higher dividend yield, I’d still go with Magna stock on the TSX today.

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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