Source: Matej Kastelic, Shutterstock
Over the past few years, the demand for electric vehicles (EVs) has increased across the world, including Canada. People have been inclined to buy EVs as they are not only good for the environment but also provide tax incentives, cheap operating costs and reduced insurance premiums.
According to a 2021 survey by KPMG Canada, about 68 per cent of Canadians planning to buy a car in the next five years are likely to opt for an EV or a hybrid model. Speaking about the survey, KPMG partner Peter Hatges said that the “huge consumer demand” for EVs puts on onus on Canadian manufacturers and governments to build the required infrastructure.
©Kalkine Group 2021
Canada is already on the path of 'green transformation' and is taking steps to reduce its carbon footprint and combat climate change. Amid this move, the government will likely focus on promoting EVs and come out with attractive schemes to motivate the citizens to opt for electric vehicles. It is possible that the government rolls out benefits for industries focusing on environmental solutions and creating a sustainable market in the future in the upcoming Budget 2021.
So, on the note of a booming EV market, let us talk about a Canadian EV stock that has been performing quite well – Magna International Inc (TSX: MG).
Magna International Inc (TSX: MG) – What You Should Know
Founded in 1954 and currently headquartered in the Ontarian town of Aurora, Magna International provides mobility technology to all types of global automakers, including EVs, such as electric vehicle systems, interiors and exteriors, roof systems. The company has a substantial strength of over 1.5 lakh employees and 91 centres for product development, engineering and sale across 27 nations.
Recently, Magna International came up with the technology called ‘eBeam’ that enables automakers to electrify trucks without compromising their utility and efficiency. Since it focuses on environmental issues and clean power, the company also came up with Magna EtelligentEco system that can cut greenhouse gases emissions by as much as 38 per cent.
Magna International is also set to develop a modular electric vehicle in partnership with Israeli start-up REE Automotive, the companies announced on Monday, April 12. This collaboration is likely to boost Magna's growth prospects even further in the field of EVs.
Magna International's Stock Performance
Magna International currently holds a market cap of C$ 33.8 billion and a price-to-book (P/B) ratio of 2.353, as per the data on the TMX. It offers a 6.54 per cent return on equity (ROE) and a 2.67 per cent return on assets (ROA).
On the dividend front, Magna’s shareholders are paid US$ 0.43 per share on a quarterly basis and has a dividend yield of 1.948 per cent. In the last three years, Magna witnessed dividend growth at the rate of 13.03 per cent and 15.27 per cent in five years.
Magna International stock has outperformed the S&P TSX Composite Index by about 58 per cent in the past year. The stock surged by over 118 per cent in the last one year and about 24 per cent year-to-date (YTD).
Priced at C$ 112 apiece as of market close on Friday, April 9, Magna stock was down by nearly six per cent in comparison to its 52-week high of C$ 118.71 (March 18, 2021) and 138.4 per cent up from its 52-week low of C$ 46.98 (April 15, 2020).
A look at Magna International’s stock one-year chart (Source: Refinitiv)
Magna International's Latest Financials
Magna International saw a 12 per cent year-over-year (YoY) increase in sales to US$ 10.6 billion in the fourth quarter of 2020. Its Q4 2020 income from operations before income taxes was US$ 973 million, which was an increase of 48.1 per cent YoY.
For the same period, Magna’s diluted earnings per share (EPS) was US$ 2.45, up from that of US$ 1.43.
A Look At The EV Market
Electric vehicles are likely to become the preferred choice of automobile for environment-conscious customers in the future as they become more affordable and efficient. According to data platform Statista, the global EV market is expected to grow at a compound annual growth rate (CAGR) of 20 per cent till 2027. By then, the size of the market would be worth around US$ 809 billion. In 2019, the estimated market size was worth about US$ 162 billion.
In Canada, the sales of zero-emission vehicles (ZEV) saw a significant gain in 2020. According to a Statistics Canada report, the country registered about 18,771 new ZEVs in Q3 2020, of which 67.1 per cent were battery-powered and 32.9 per cent were plug-in hybrid vehicles. This figure was double the number of vehicles sold in the previous quarter.
The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view.