Lear Corporation (LEA) versus Magna International (MGA) Financial Analysis

Lear Corporation (NYSE: LEA) and Magna International (NYSE:MGA) are both large-cap auto/tires/trucks companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, risk, valuation, analyst recommendations, institutional ownership and dividends.

Valuation & Earnings

This table compares Lear Corporation and Magna International’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lear Corporation $19.29 billion 0.55 $1.97 billion $15.06 10.33
Magna International $37.16 billion 0.49 $4.01 billion $5.54 8.88

Magna International has higher revenue and earnings than Lear Corporation. Magna International is trading at a lower price-to-earnings ratio than Lear Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations for Lear Corporation and Magna International, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lear Corporation 3 3 4 0 2.10
Magna International 1 4 7 1 2.62

Lear Corporation presently has a consensus price target of $149.30, suggesting a potential downside of 4.04%. Magna International has a consensus price target of $52.67, suggesting a potential upside of 7.05%. Given Magna International’s stronger consensus rating and higher possible upside, analysts clearly believe Magna International is more favorable than Lear Corporation.

Dividends

Lear Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 1.3%. Magna International pays an annual dividend of $1.10 per share and has a dividend yield of 2.2%. Lear Corporation pays out 13.3% of its earnings in the form of a dividend. Magna International pays out 19.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lear Corporation has raised its dividend for 6 consecutive years and Magna International has raised its dividend for 5 consecutive years.

Profitability

This table compares Lear Corporation and Magna International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lear Corporation 5.51% 32.34% 10.51%
Magna International 5.73% 20.01% 9.12%

Volatility and Risk

Lear Corporation has a beta of 1.31, meaning that its stock price is 31% more volatile than the S&P 500. Comparatively, Magna International has a beta of 1.43, meaning that its stock price is 43% more volatile than the S&P 500.

Institutional and Insider Ownership

94.3% of Lear Corporation shares are owned by institutional investors. Comparatively, 59.7% of Magna International shares are owned by institutional investors. 0.5% of Lear Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Lear Corporation Company Profile

Lear Corporation (Lear) is a supplier to the global automotive industry. The Company is engaged in supplying seating, electrical distribution systems and electronic modules, as well as related sub-systems, components and software, to automotive manufacturers. The Company’s segments include Seating and E-Systems. The Company serves the automotive and light truck market. The Seating segment consists of the design, development, engineering, just-in-time assembly and delivery of complete seat systems, as well as the design, development, engineering and manufacture of all seat components, including seat covers and surface materials, such as leather and fabric, seat structures and mechanisms, seat foam and headrests. The E-Systems segment consists of the design, development, engineering, manufacture, assembly and supply of electrical distribution systems, electronic modules and related components and software for light vehicles across the world.

Magna International Company Profile

Magna International Inc. (Magna) is a global automotive supplier. The Company’s segments are North America, Europe, Asia, Rest of World, and Corporate and Other. The Company’s product capabilities include producing body, chassis, exterior, seating, powertrain, electronic, active driver assistance, vision, closure, and roof systems and modules, as well as vehicle engineering and contract manufacturing. The Company has over 320 manufacturing operations and approximately 100 product development, engineering and sales centers in over 30 countries. It provides a range of body, chassis and engineering solutions to its original equipment manufacturer (OEM) customers. It has capabilities in powertrain design, development, testing and manufacturing. It offers bumper fascia systems, exterior trim and modular systems. It offers exterior and interior mirror systems. It offers sealing, trim, engineered glass and module systems. It offers softtops, retractable hardtops, modular tops and hardtops.

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