When markets get rocky, value investors start paying attention. Panic selling often brings down quality stocks, opening a window to pick up solid businesses at discounted prices. That’s the current setup for Magna International (TSX:MG) and BRP (TSX:DOO). Both value stocks are facing short-term headwinds, but the long-term potential is still very much intact. And with share prices well off their highs, now might be a smart time to act.
Magna
Magna is one of the world’s largest auto parts suppliers. It has operations across North America, Europe, and Asia. It builds everything from body structures and powertrains to advanced driver-assist systems. And it supplies pretty much every major car company on the planet. But like the rest of the auto industry, Magna has been hit by a wave of challenges, including supply chain issues, electric vehicle (EV) slowdowns, and general economic uncertainty.
In its latest quarterly earnings report, Magna posted first-quarter (Q1) 2025 sales of US$10.1 billion, an 8% decrease from last year. Adjusted earnings per share (EPS) came in at US$0.78, down from US$1.08 a year ago. Management pointed to elevated engineering costs and lower-than-expected production volumes as reasons for the drop. However, the results still led to an increase in its 2025 outlook, targeting sales between US$40 billion and US$41.6 billion for the year.
This shows that Magna’s issues are more cyclical than structural. The value stock has a strong balance sheet, deep customer relationships, and is investing heavily in EV and autonomous vehicle tech. In other words, it’s still very much in the game. With the stock trading at 10.5 times forward earnings and offering a 5% dividend yield, value hunters should take note. If auto production picks up, and it usually does once supply chains normalize, Magna could rebound nicely.
BRP
Now, let’s talk about BRP, the maker of Ski-Doos, Sea-Doos, and Can-Am off-road vehicles. It’s a favourite for powersports fans, and for years, it’s been a Canadian success story. But lately, the value stock has taken a beating. Shares are down sharply from their 2021 highs, and in Q1 fiscal 2025, BRP reported a 16.4% drop in revenue to $2.031 billion. Normalized earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 34.4% to $247.2 million, while net income plunged to a loss of $7.4 million.
The bigger picture is that BRP is grappling with weak consumer demand and elevated promotional spending. North American retail sales were flat compared to last year, with a drop in year-round product sales offset by strong snowmobile results. But the value stock is proactively managing through the downturn. It’s clearing excess inventory, trimming costs, and doubling down on its core power sports business. The recent decision to sell its marine division is part of this strategic shift.
The good news? BRP is still profitable, generating strong cash flow and paying out a quarterly dividend of $0.86 annually. That’s a 1.3% dividend yield, nothing huge, but backed by a resilient business. The long-term outlook remains promising, especially if economic conditions improve and consumers return to spending on recreational products. With the value stock trading at a low valuation relative to its historical averages, the upside could be meaningful.
Bottom line
Both Magna and BRP are undoubtedly facing challenges. But those are the kinds of setups value investors like: strong value stocks going through temporary rough patches. Investors who are patient and can stomach a bit of volatility might be rewarded down the road. These aren’t “get-rich-quick” stocks. But for long-term portfolios, they look like well-priced building blocks. If everyone else is panicking, staying calm and buying value could be the smart move. Magna and BRP aren’t perfect, but they’re built to last. And today, these are available at a steep discount.
