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Magna Worldwide (TSX:MG)(NYSE:MGA) is an Aurora-based firm that’s engaged within the design, engineering, and manufacturing of parts, assemblies, techniques, subsystems, and modules for autos and lightweight vans. It’s the largest auto components producer in North America. At this time, I need to focus on whether or not it’s price it for buyers to purchase the dip in Magna inventory. Let’s dive in.
Why Magna has had a tough begin to 2022
Shares of Magna inventory have dropped 8% in 2022 as of late-morning buying and selling on February 15. Nonetheless, the inventory was up 2.8% on the identical day. North American shares broadly bounced again after a tough begin to the week. During the last 24 hours, information broke that Russia was apparently pulling again troops from the Ukrainian border. That mentioned, intelligence experiences have predicted an imminent invasion for weeks now. It’s obvious that the Western powers are flying blind with regards to anticipating the actions of Russia to this point.
In the summertime of 2021, I’d mentioned why Magna inventory certified as an electrical automobile (EV) centered funding. It has succumbed to broader volatility to start out 2022, however the future nonetheless seems to be vibrant.
Ought to buyers be assured on this firm for the remainder of the yr?
Magna launched its fourth-quarter and full-year 2021 earnings on February 11. Gross sales fell 14% yr over yr to $9.1 billion within the fourth quarter. In the meantime, adjusted earnings per share greater than halved from This autumn 2020 to $1.30. These earnings nonetheless managed to beat expectations. International gentle automobile manufacturing has taken a significant hit resulting from semiconductor chip shortages.
For the complete yr, gross sales climbed 11% yr over yr to $36.2 billion. In the meantime, international gentle automobile manufacturing elevated 4% from the earlier yr. Furthermore, adjusted earnings per share was reported at $5.13 — up from $3.95 for the complete yr in 2020. The car trade was hit very arduous by the COVID-19 pandemic. Thankfully, it has managed to rebound properly as a result of lifting of restrictions and a return to some extent of normalcy. Even with the semiconductor scarcity, Magna nonetheless put collectively a a lot stronger yr in 2021.
The corporate unveiled its 2022 and 2024 outlook in its most up-to-date quarterly report. It’s projected gentle automobile manufacturing of 15.2 million models in North America in 2022 and 17.5 million models in 2024. In the meantime, additionally it is projecting comparable unit manufacturing development in its European and Chinese language markets. It anticipates complete gross sales between $38.8 and $40.4 billion in 2022. Furthermore, it initiatives a gross sales vary between $44.6 and $47.1 billion in 2024.
That is promising for Magna inventory going ahead. Certainly, buyers must be desirous to get in on the EV area in any method they will within the first half of the 2020s.
Right here’s why I’m trying to purchase Magna inventory at the moment
Again in late January, I’d mentioned why Magna inventory appeared undervalued. Shares of this inventory possess a beneficial price-to-earnings ratio of 13. In its fourth-quarter report, Magna introduced a 5% enhance to its quarterly dividend to $0.45 per share. That represents a 2.2% yield. I’m nonetheless trying to snatch up Magna inventory in the course of February.
