Intrinsic value of Magna International - MGA

Previous Close

$46.10

  Intrinsic Value

$97.78

stock screener

  Rating & Target

str. buy

+112%

  Value-price divergence*

+41%

Previous close

$46.10

 
Intrinsic value

$97.78

 
Up/down potential

+112%

 
Rating

str. buy

 
Value-price divergence*

+41%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MGA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 17.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.42
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
Revenue, $m
  36,445
  38,377
  40,399
  42,517
  44,736
  47,061
  49,497
  52,051
  54,728
  57,535
  60,479
  63,566
  66,804
  70,201
  73,765
  77,504
  81,427
  85,543
  89,863
  94,397
  99,155
  104,149
  109,391
  114,892
  120,668
  126,730
  133,094
  139,774
  146,787
  154,150
  161,879
Variable operating expenses, $m
 
  35,181
  37,025
  38,956
  40,979
  43,099
  45,320
  47,648
  50,089
  52,649
  55,332
  57,955
  60,907
  64,004
  67,253
  70,662
  74,239
  77,992
  81,930
  86,064
  90,402
  94,955
  99,734
  104,750
  110,015
  115,543
  121,345
  127,435
  133,829
  140,542
  147,589
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  33,665
  35,181
  37,025
  38,956
  40,979
  43,099
  45,320
  47,648
  50,089
  52,649
  55,332
  57,955
  60,907
  64,004
  67,253
  70,662
  74,239
  77,992
  81,930
  86,064
  90,402
  94,955
  99,734
  104,750
  110,015
  115,543
  121,345
  127,435
  133,829
  140,542
  147,589
Operating income, $m
  2,780
  3,195
  3,374
  3,561
  3,757
  3,962
  4,177
  4,403
  4,639
  4,887
  5,147
  5,611
  5,897
  6,197
  6,512
  6,842
  7,188
  7,551
  7,933
  8,333
  8,753
  9,194
  9,657
  10,142
  10,652
  11,187
  11,749
  12,339
  12,958
  13,608
  14,290
EBITDA, $m
  3,836
  3,795
  3,995
  4,204
  4,423
  4,653
  4,894
  5,147
  5,411
  5,689
  5,980
  6,285
  6,605
  6,941
  7,294
  7,663
  8,051
  8,458
  8,885
  9,334
  9,804
  10,298
  10,816
  11,360
  11,931
  12,531
  13,160
  13,820
  14,514
  15,242
  16,006
Interest expense (income), $m
  99
  84
  106
  129
  154
  179
  206
  234
  264
  295
  327
  361
  397
  434
  473
  514
  558
  603
  650
  700
  753
  808
  865
  926
  989
  1,056
  1,126
  1,200
  1,277
  1,358
  1,443
Earnings before tax, $m
  2,780
  3,112
  3,268
  3,432
  3,603
  3,783
  3,971
  4,168
  4,375
  4,592
  4,820
  5,250
  5,501
  5,763
  6,038
  6,327
  6,630
  6,949
  7,282
  7,633
  8,000
  8,386
  8,791
  9,216
  9,663
  10,131
  10,623
  11,139
  11,681
  12,250
  12,847
Tax expense, $m
  706
  840
  882
  927
  973
  1,021
  1,072
  1,125
  1,181
  1,240
  1,301
  1,418
  1,485
  1,556
  1,630
  1,708
  1,790
  1,876
  1,966
  2,061
  2,160
  2,264
  2,374
  2,488
  2,609
  2,735
  2,868
  3,008
  3,154
  3,307
  3,469
Net income, $m
  2,031
  2,272
  2,386
  2,505
  2,630
  2,761
  2,899
  3,043
  3,194
  3,352
  3,518
  3,833
  4,015
  4,207
  4,408
  4,619
  4,840
  5,072
  5,316
  5,572
  5,840
  6,122
  6,418
  6,728
  7,054
  7,396
  7,755
  8,132
  8,527
  8,942
  9,378

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  974
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  22,566
  22,735
  23,933
  25,188
  26,502
  27,880
  29,323
  30,836
  32,422
  34,085
  35,829
  37,658
  39,576
  41,588
  43,700
  45,914
  48,239
  50,677
  53,237
  55,922
  58,741
  61,700
  64,805
  68,064
  71,486
  75,077
  78,847
  82,805
  86,959
  91,321
  95,900
Adjusted assets (=assets-cash), $m
  21,592
  22,735
  23,933
  25,188
  26,502
  27,880
  29,323
  30,836
  32,422
  34,085
  35,829
  37,658
  39,576
  41,588
  43,700
  45,914
  48,239
  50,677
  53,237
  55,922
  58,741
  61,700
  64,805
  68,064
  71,486
  75,077
  78,847
  82,805
  86,959
  91,321
  95,900
Revenue / Adjusted assets
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
  1.688
Average production assets, $m
  3,878
  4,068
  4,282
  4,507
  4,742
  4,988
  5,247
  5,517
  5,801
  6,099
  6,411
  6,738
  7,081
  7,441
  7,819
  8,215
  8,631
  9,068
  9,526
  10,006
  10,510
  11,040
  11,595
  12,179
  12,791
  13,433
  14,108
  14,816
  15,559
  16,340
  17,159
Working capital, $m
  1,468
  1,305
  1,374
  1,446
  1,521
  1,600
  1,683
  1,770
  1,861
  1,956
  2,056
  2,161
  2,271
  2,387
  2,508
  2,635
  2,769
  2,908
  3,055
  3,209
  3,371
  3,541
  3,719
  3,906
  4,103
  4,309
  4,525
  4,752
  4,991
  5,241
  5,504
Total debt, $m
  3,156
  3,021
  3,689
  4,388
  5,120
  5,887
  6,691
  7,534
  8,417
  9,343
  10,315
  11,333
  12,402
  13,523
  14,699
  15,932
  17,227
  18,585
  20,011
  21,507
  23,077
  24,725
  26,454
  28,270
  30,175
  32,176
  34,276
  36,480
  38,794
  41,224
  43,774
Total liabilities, $m
  12,798
  12,663
  13,331
  14,030
  14,762
  15,529
  16,333
  17,176
  18,059
  18,985
  19,957
  20,975
  22,044
  23,165
  24,341
  25,574
  26,869
  28,227
  29,653
  31,149
  32,719
  34,367
  36,096
  37,912
  39,817
  41,818
  43,918
  46,122
  48,436
  50,866
  53,416
Total equity, $m
  9,768
  10,072
  10,602
  11,158
  11,741
  12,351
  12,990
  13,660
  14,363
  15,100
  15,872
  16,682
  17,532
  18,424
  19,359
  20,340
  21,370
  22,450
  23,584
  24,774
  26,022
  27,333
  28,709
  30,152
  31,668
  33,259
  34,929
  36,682
  38,523
  40,455
  42,484
Total liabilities and equity, $m
  22,566
  22,735
  23,933
  25,188
  26,503
  27,880
  29,323
  30,836
  32,422
  34,085
  35,829
  37,657
  39,576
  41,589
  43,700
  45,914
  48,239
  50,677
  53,237
  55,923
  58,741
  61,700
  64,805
  68,064
  71,485
  75,077
  78,847
  82,804
  86,959
  91,321
  95,900
Debt-to-equity ratio
  0.323
  0.300
  0.350
  0.390
  0.440
  0.480
  0.520
  0.550
  0.590
  0.620
  0.650
  0.680
  0.710
  0.730
  0.760
  0.780
  0.810
  0.830
  0.850
  0.870
  0.890
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  0.990
  1.010
  1.020
  1.030
Adjusted equity ratio
  0.436
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,031
  2,272
  2,386
  2,505
  2,630
  2,761
  2,899
  3,043
  3,194
  3,352
  3,518
  3,833
  4,015
  4,207
  4,408
  4,619
  4,840
  5,072
  5,316
  5,572
  5,840
  6,122
  6,418
  6,728
  7,054
  7,396
  7,755
  8,132
  8,527
  8,942
  9,378
Depreciation, amort., depletion, $m
  1,056
  599
  621
  643
  667
  691
  717
  744
  772
  802
  833
  674
  708
  744
  782
  822
  863
  907
  953
  1,001
  1,051
  1,104
  1,160
  1,218
  1,279
  1,343
  1,411
  1,482
  1,556
  1,634
  1,716
Funds from operations, $m
  3,467
  2,871
  3,006
  3,148
  3,297
  3,453
  3,616
  3,787
  3,966
  4,154
  4,352
  4,507
  4,724
  4,951
  5,190
  5,440
  5,703
  5,979
  6,269
  6,572
  6,891
  7,226
  7,577
  7,946
  8,333
  8,739
  9,165
  9,613
  10,083
  10,576
  11,094
Change in working capital, $m
  81
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  196
  206
  216
  227
  238
  250
  263
Cash from operations, $m
  3,386
  2,805
  2,938
  3,076
  3,221
  3,374
  3,533
  3,700
  3,875
  4,059
  4,252
  4,402
  4,613
  4,836
  5,069
  5,313
  5,570
  5,839
  6,122
  6,418
  6,729
  7,056
  7,399
  7,759
  8,136
  8,533
  8,949
  9,386
  9,845
  10,326
  10,832
Maintenance CAPEX, $m
  0
  -388
  -407
  -428
  -451
  -474
  -499
  -525
  -552
  -580
  -610
  -641
  -674
  -708
  -744
  -782
  -822
  -863
  -907
  -953
  -1,001
  -1,051
  -1,104
  -1,160
  -1,218
  -1,279
  -1,343
  -1,411
  -1,482
  -1,556
  -1,634
New CAPEX, $m
  -1,807
  -190
  -214
  -225
  -235
  -246
  -258
  -271
  -284
  -298
  -312
  -327
  -343
  -360
  -378
  -396
  -416
  -436
  -458
  -481
  -504
  -529
  -556
  -583
  -612
  -643
  -675
  -708
  -743
  -780
  -819
Cash from investing activities, $m
  -4,271
  -578
  -621
  -653
  -686
  -720
  -757
  -796
  -836
  -878
  -922
  -968
  -1,017
  -1,068
  -1,122
  -1,178
  -1,238
  -1,299
  -1,365
  -1,434
  -1,505
  -1,580
  -1,660
  -1,743
  -1,830
  -1,922
  -2,018
  -2,119
  -2,225
  -2,336
  -2,453
Free cash flow, $m
  -885
  2,227
  2,316
  2,423
  2,536
  2,653
  2,776
  2,905
  3,040
  3,181
  3,330
  3,433
  3,596
  3,767
  3,947
  4,135
  4,333
  4,540
  4,757
  4,985
  5,225
  5,476
  5,739
  6,016
  6,306
  6,611
  6,931
  7,267
  7,620
  7,990
  8,378
Issuance/(repayment) of debt, $m
  251
  627
  667
  699
  732
  767
  804
  843
  883
  926
  971
  1,019
  1,069
  1,121
  1,176
  1,234
  1,295
  1,358
  1,425
  1,496
  1,570
  1,648
  1,730
  1,815
  1,906
  2,000
  2,100
  2,204
  2,314
  2,429
  2,550
Issuance/(repurchase) of shares, $m
  -880
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -635
  627
  667
  699
  732
  767
  804
  843
  883
  926
  971
  1,019
  1,069
  1,121
  1,176
  1,234
  1,295
  1,358
  1,425
  1,496
  1,570
  1,648
  1,730
  1,815
  1,906
  2,000
  2,100
  2,204
  2,314
  2,429
  2,550
Total cash flow (excl. dividends), $m
  -1,504
  2,854
  2,984
  3,122
  3,268
  3,420
  3,580
  3,747
  3,923
  4,108
  4,301
  4,452
  4,665
  4,888
  5,123
  5,369
  5,627
  5,898
  6,183
  6,481
  6,795
  7,124
  7,469
  7,832
  8,212
  8,612
  9,031
  9,471
  9,934
  10,419
  10,929
Retained Cash Flow (-), $m
  -802
  -516
  -531
  -556
  -582
  -610
  -639
  -670
  -703
  -737
  -773
  -810
  -850
  -891
  -935
  -981
  -1,030
  -1,080
  -1,134
  -1,190
  -1,249
  -1,311
  -1,376
  -1,444
  -1,516
  -1,591
  -1,670
  -1,753
  -1,841
  -1,932
  -2,028
Prev. year cash balance distribution, $m
 
  212
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,551
  2,453
  2,567
  2,685
  2,810
  2,940
  3,077
  3,221
  3,371
  3,528
  3,642
  3,815
  3,997
  4,188
  4,388
  4,598
  4,818
  5,049
  5,291
  5,546
  5,813
  6,093
  6,388
  6,696
  7,021
  7,361
  7,718
  8,093
  8,487
  8,900
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  2,445
  2,246
  2,234
  2,211
  2,178
  2,134
  2,079
  2,013
  1,936
  1,850
  1,729
  1,628
  1,520
  1,406
  1,288
  1,168
  1,048
  930
  815
  705
  601
  506
  419
  341
  273
  215
  166
  125
  93
  67
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Magna International Inc. develops, manufactures, engineers, supplies, and sells automotive products. It operates through North America, Europe, Asia, and Rest of World segments. The company offers body and chassis systems, and related engineering services; seating systems, including complete seating systems, seat structures and mechanisms, and foam and trim products; and powertrain systems, such as transmissions, driveline systems, fluid pressure and controls, metal forming solutions, and engineering services. It also provides vision systems comprising interior and exterior mirrors, actuators, door handle illumination products, headlamps and tail lamps, and small lighting products; and closure systems comprising door modules, power closure systems, engineered glass products, window systems, running boards and roof racks, latching systems, lighting systems, sealing systems, electronic features, handle assemblies, composite components, and hinges and rods. In addition, the company provides electronic systems, including driver assistance systems, secure connectivity products, head-up displays, and electronic controllers; exterior systems, such as fascia and trim products, front end modules, liftgate and exterior modules, active aerodynamics, and lightweight composites; and roof systems, including sliding folding and modular roofs, retractable hard tops, and soft tops. Further, it offers vehicle engineering and contract vehicle assembly services; fuel systems; engineering support services; and tooling and other products. The company was founded in 1957 and is headquartered in Aurora, Canada.

FINANCIAL RATIOS  of  Magna International (MGA)

Valuation Ratios
P/E Ratio 8.7
Price to Sales 0.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 11.2
Growth Rates
Sales Growth Rate 13.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 24.5%
Total Debt to Equity 32.3%
Interest Coverage 29
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 10.5%
Return On Total Capital 16.6%
Ret/ On T. Cap. - 3 Yr. Avg. 18.2%
Return On Equity 21.7%
Return On Equity - 3 Yr. Avg. 21.7%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 14.6%
Gross Margin - 3 Yr. Avg. 14.4%
EBITDA Margin 10.8%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 25.4%
Eff/ Tax Rate - 3 Yr. Avg. 26.1%
Payout Ratio 19%

MGA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MGA stock intrinsic value calculation we used $36445 million for the last fiscal year's total revenue generated by Magna International. The default revenue input number comes from 2016 income statement of Magna International. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MGA stock valuation model: a) initial revenue growth rate of 5.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MGA is calculated based on our internal credit rating of Magna International, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Magna International.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MGA stock the variable cost ratio is equal to 91.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MGA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Magna International.

Corporate tax rate of 27% is the nominal tax rate for Magna International. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MGA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MGA are equal to 10.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Magna International operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MGA is equal to 3.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $9768 million for Magna International - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 373.333 million for Magna International is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Magna International at the current share price and the inputted number of shares is $17.2 billion.

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COMPANY NEWS

▶ Top Ranked Value Stocks to Buy for August 17th   [Aug-17-17 09:33AM  Zacks]
▶ Rhetoric over: 3-nation efforts to revise NAFTA begin   [Aug-15-17 10:22PM  Associated Press]
▶ Magna beats Street 2Q forecasts   [Aug-11-17 10:47PM  Associated Press]
▶ Magna Announces Second Quarter Results   [05:00AM  PR Newswire]
▶ Cramer: Transports Getting Run Off the Road   [Jul-26-17 07:01PM  TheStreet.com]
▶ Magna International: Cramer's Top Takeaways   [06:41AM  TheStreet.com]
▶ Cramer Remix: Why investors shouldnt abandon Alphabet   [Jul-25-17 07:27PM  CNBC Videos]
▶ 3 Lowest P/E Stocks Today   [Jul-07-17 08:30PM  Motley Fool]
▶ Magna Establishes Automatic Share Purchase Plan   [Jun-29-17 05:00PM  CNW Group]
▶ [$$] More British parts being used in UK cars, says report   [Jun-19-17 07:03PM  Financial Times]
▶ Magna announces 2017 annual meeting results   [May-11-17 03:06PM  PR Newswire]
▶ Magna tops Street 1Q forecasts   [08:46AM  Associated Press]
▶ Magna Announces First Quarter Results   [08:00AM  CNW Group]
▶ Magna named one of the best places to work   [May-10-17 10:41AM  PR Newswire]
▶ Magna Receives Most Innovative Automotive Supplier Award   [May-05-17 08:25AM  PR Newswire]
▶ [$$] iPod Co-Creator to Advise Auto Supplier Magna   [May-03-17 10:00AM  The Wall Street Journal]
▶ Magna Posts 2016 Annual Report   [Mar-29-17 06:08PM  PR Newswire]
▶ Magna Posts 2016 Annual Report   [06:08PM  CNW Group]
Stock chart of MGA Financial statements of MGA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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