Yahoo Finance The Magna International (TSE:MG) Share Price Is Up 27% And Shareholders Are Holding On
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Magna International share price has climbed 27% in five years, easily topping the market return of 4.9% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 0.5% in the last year, including dividends.
Check out our latest analysis for Magna International
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Magna International achieved compound earnings per share (EPS) growth of 14% per year. The EPS growth is more impressive than the yearly share price gain of 4.9% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.50 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Magna International’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Magna International’s TSR for the last 5 years was 42%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Magna International provided a TSR of 0.5% over the last twelve months. But that was short of the market average. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 7.2% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
