Canadian investments can be some of the best in the world. Yet that tends to lead most investors to some of the more obvious choices. However, there are “sneakier” buys out there that investors can hold onto these days – ones that offer value, as well as provide a long-term bargain on the TSX today.
That’s why today we’re going to focus on Magna International (TSX: MG). This vehicle parts manufacturer might just be hitting its stride. After years of volatility with shares rising higher as electric vehicles (EV) took hold, only to drop amidst supply-chain issues, now could be the best time to get back in.
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Why now
When it comes to looking at Magna stock, one of the biggest questions has to be “why now?” On a micro scale, this would be earnings. The Canadian stock reported strong earnings despite a revenue drop, reporting a 3% year-over-year decline to $10.6 billion in the second quarter. This came about from decreased vehicle production in North America and Europe. Furthermore, the auto parts manufacturer was also the end of several production lines.
Yet it wasn’t all bad news. In fact, earnings grew during this period, with net income rising to $379 million from $313 million the year before. This was helped along by productivity and efficiency gains. So when vehicle production ramps up, these efficiencies can really work their magic.
Adjusted earnings before interest and taxes (EBIT) improved as well to $583 million, showing that cost management and operational improvement efforts have been successful. Magna’s ability to maintain profitability even with lower sales shows just how strong this Canadian stock is as a long-term buy.
More to come
Alright, so the current outlook is pretty good. But what makes it even better is the value and long-term outlook. Magna recently received the J.D. Power Platinum Plant Quality Award. Furthermore, it issued Senior Notes to improve its financial flexibility to support more strategic investments.
What’s more, the Canadian stock has a dividend, returning $137 million to shareholders during the quarter. It now offers a 4.3% dividend yield, and that’s supported by a very reasonable 45% payout ratio. The company is therefore an attractive option for income-seeking investors. Not just from growth, but dividends as well.
Looking ahead, investors will have a few key factors to watch. Magna’s updates on vehicle production programs and new launches will be critical when trying to reverse those sales declines. What’s more, keeping costs down during these tariff troubles is great, but that will only go so far. Securing more customer recoveries will be needed to uphold profit margins.
Bottom line
All considered, Magna stock could be a huge long-term winner for Canadian investors. This stock is an attractive investment offering exposure to the future of the EV industry. What’s more, it demonstrated strong earnings performance even amidst revenue declines. Furthermore, the Canadian stock proved to be financially and operationally sound during its latest earnings.
With new product launches and strong cost management, this is a win for long-term investors. So when tariffs take the wayside, and investors look for EV strength again, Magna stock will be patiently waiting. Ready to explode.
