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What are we looking for?

In Canada there are 125,000 passenger vehicles or light trucks sold each month on average. Even with interest rates that started rising in March of 2022, year-over-year monthly vehicle sales have been climbing. The Bank of Canada started lowering interest rates in June of this year. Will lower rates accelerate vehicle purchases and drive more revenue at auto-parts suppliers? This week we are looking at auto-parts companies, auto dealerships and Canadian-listed auto manufacturers.

The screen

We used stockcalc’s screener to select the top 10 listed auto-parts companies, dealerships and manufacturers by market capitalization on the TSX and TSX-V. We then used stockcalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price.

Overview of the techniques used:

  • Discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value per share;
  • A price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
  • An adjusted book value (ABV) is calculated by multiplying book value per share by its 10-year average price-to-book ratio.
  • If we have analyst coverage, we may consider the consensus target price.

More about stockcalc

Stockcalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. Stockcalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to stockcalc using the promo code ‘Globe30,′ which offers a 30-day free trial and special pricing for the second month.

What we found

How auto parts firms stack up

NameTickerMarket Cap ($ Mil)Recent Close ($)StockCalc Val ($)Diff (%)DCF Value($)Price Comps($)ABV ($)Analyst Target ($)1 Year Return(%)Dividend Yield(%)
Magna InternationalMG-T16765.658.3578.5534.687.4487.5992.0395.56-11.54.4
Boyd Group ServicesBYD-T4572.1212.93249.1517.0299.34152.89295.22397.74-7.80.3
LinamarLNR-T3772.961.2767.339.9113.5927.7091.6982.600.11.5
NFI GroupNFI-T1943.616.3317.648.015.5415.6615.3430.4223.80.0
Martinrea InternationalMRE-T831.211.1115.6641.019.158.3017.2817.89-1.01.8
AutoCanadaACQ-T354.315.2818.0618.2-33.17-15.0826.5918.06-35.90.0
Exco TechnologiesXTC-T335.38.688.963.27.446.5010.8811.0022.84.9
Westport Fuel SystemsWPRT-T102.05.917.8532.8-22.8310.3415.6518.58-17.80.0
First HydrogenFHYD-X31.10.430.5323.3-0.970.53-1.440.00-70.50.0
Solution FinancialSFI-T24.60.290.290.0-0.900.180.400.0018.01.4

source www.stockcalc.com

You can see in the accompanying table the percentage difference between each stock’s recent close price and its intrinsic value. The “stockcalc valuation” column is a weighted calculation derived from our models and analyst target data if used. Half of the companies on this list are dividend payers. Exco Technologies Ltd. XTC-T has the highest yield of this group at 4.9 per cent and a sustainable 55-per-cent payout ratio. It produces automotive interior components and assemblies for seating, cargo storage and restraint. Boyd Group Services Inc. BYD-T is engaged in automotive collision and glass repair and has the highest price-to-book (3.9 times) and price-to-earnings (56.2 times) ratios of this group. Let’s look at a few more of these companies:

Magna International Inc. MG-T was founded in 1957, has more than 179,000 employees, and is based in Aurora, Ont. Its product groups include exteriors, interiors, seating, roof systems, body and chassis, powertrain, vision and electronic systems, closing systems, electric vehicle systems, tooling and engineering, and contract vehicle assembly. In 2023, 48 per cent of Magna’s US$42.8-billion of revenue came from North America while Europe accounted for approximately 38 per cent and Asia the remainder. The company’s top three customers are GM, Mercedes and BMW. All of our models for MG-T show it to be significantly undervalued.

Westport Fuel Systems Inc. WPRT-T is engaged in the engineering, manufacturing and supply of alternative fuel systems and components for transportation applications. It has three operating segments: the original equipment manufacturers (OEM) segment, which designs, manufactures and sells alternative fuel systems, components and electronics to OEMs; the independent aftermarket (IAM) segment, which includes IAM products, conversion kits and components; and corporate, which includes public company activities, corporate oversight, financing and capital allocation. Three of our four models for WPRT-T show it to be undervalued. WPRT-T reports third-quarter 2024 financials on Nov. 12.

Investing involves risk. Stockcalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.

Brian Donovan, CBV, is the president of stockcalc, a Canadian fintech based in Miramichi, N.B.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 20/11/24 2:13pm EST.

SymbolName% changeLast
MG-T
Magna International Inc
+0.84%60.18
BYD-T
Boyd Group Services Inc
-1.19%218.03
LNR-T
Linamar Corp
+1.53%61.09
NFI-T
Nfi Group Inc.
+0.07%14.6
MRE-T
Martinrea International Inc
+0.51%9.92
ACQ-T
Autocanada Inc
-0.11%18.57
XTC-T
Exco Tech
0%8.51
WPRT-T
Westport Fuel Systems Inc
-0.33%6.04
FHYD-X
First Hydrogen Corp
-9.72%0.325
SFI-T
Solution Financial Inc
+1.79%0.285

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