BFIN 250 ANALYSIS OF MG.

TO
By JORGE FUENTES ZAPATA

PROFESSOR: SHAWN RICHARDS

DATE: APRIL 27TH, 2015

Jorge Fuentes

BFIN 250 Make-Up Assignment

27/04/2015

The following financial ratios have been calculated for Magna International Inc. The leading
global automotive supplier1. It is a publicly-traded company whose shares are offered through the
Toronto Stock Exchange and the New York Stock Exchange with ticker symbol listed as MG and
MGA respectively. The ratios presented apply to fiscal year-ended 2013 and fiscal year-ended
2014.
FINANCIAL RATIOS
RATIOS
Gross Profit Margin
Operating Profit Margin
Return on Sales
Return on Total Assets
Earnings per Share

YEAR 2014
13.69%
6.93%
5.14%
10.42%
$8.81

YEAR 2013
13.05%
5.47%
4.48%
8.68%
$6.85

EXPLANATION

Gross Profit Margin: As seen in the Income Statements of the corporation, the Sales Revenue for
2014 was of $36,641 million (or $36.6B) and COGS was of $31,623 million (or $31.62B). By
subtracting the latter from the former we arrived at the Gross Profit of $5,018 million, which
divided over the Sales Revenue figure gave a percentage of 13.69%. The same process was used
for 2013 where Sales Revenue equaled $34.83B, COGS equaled $30.28B, and Gross Profit was
of $4.5B. The Gross Profit divided by the Sales Revenue in 2013 gave us a Gross Profit Margin
of 13.05%
Operating Profit Margin: In 2014 EBIT was of $2,539 million, this divided by the years Sales
Revenue gave an Operating Profit Margin of 6.93%. In 2013 EBIT was of $1,905 million, which
divided by that years Sales Revenue gave an Operating Profit Margin of 5.47%
Return on Sales: Net Income was of $1,882 million in 2014, which divided by the years Sales
Revenue gave an ROS of 5.14%. Net Income was of $1,561 million in 2013, which divided by
that years Sales Revenue gave an ROS of 4.48%
Return on Total Assets: Total assets in 2014 were of $18,139 million, and in 2013 they were of
$17,990 million. As an average (needed to calculate 2014 ROTA) they equaled $18,064.50

Retrieved from: http://www.magna.com/about-magna

1|Page

Jorge Fuentes

BFIN 250 Make-Up Assignment

27/04/2015

million. Net Income (for 2014) was then divided over this number to calculate 2014 ROTA of
10.42%. In 2013, the average is not relevant. Therefore, the Total Assets figure (not Average Total
Assets) for that year was used to calculate 2013 ROTA. That years Net Income divided over Total
Assets gave a 2013 ROTA of 8.68%.
Earnings per Share: The EPS number given was of Basic (not Diluted) shares. Therefore, EPS
in 2014 was calculated by dividing the years Net Income over the number of Shares Outstanding
(Basic), which were 213.6 million shares. The EPS ($1,882 million / 213.6 million shares) gave
$8.81 in 2014. The same process was utilized for calculating EPS in year 2013. ($1,561 million /
227.9 million shares) equaled earnings of $6.85 per share.
ANALYSIS

Four of the five ratios used to evaluate Magna International were Profitability Ratios and the
remaining ratio was a Market-value & Investment Ratio. According to the profitability ratios,
Magna International has managed to increase their profitability year-over-year. Both the Gross
Profit Margin and the Operating Profit Margin increased substantially in 2014 when compared
against 2013. The Gross Margin saw a 0.64% increase, and the Operating Margin rose by 1.46%.
When Magnas profitability is compared to the Industry Average we have gathered the following
data:

Gross Profit Margin

Operating Profit Margin
Return on Sales (Profit Margin)

MAGNA
13.69%
6.93%
5.14%

INDUSTRY AVERAGE2
14.47%
6.02%
4.16%

Even though the industry average has a higher Gross Profit margin, Magna International has
managed to outperform the industry when it comes to Operating Margin and more substantially
through its Return on Sales (Profit Margin) where Magna beats the industry by nearly 1%.
This indicates that although Magna has a greater COGS expense than the industry average, it still
manages to keep its operating expenses at a lower and more sustainable rate than the industry. As
indicated by its ROS and Operating Margin.

Industry Average data retrieved from Login onto TD WebBroker > Markets & Research > MG > Fundamentals >
Industry Comparison. A direct link cannot be provided as data can only be accessed through login onto WebBroker.

2|Page

Jorge Fuentes

BFIN 250 Make-Up Assignment

27/04/2015

Magna has a greater Return on Total Assets than the industry, where they stand 10.42% and 9.75%
respectively. This indicator demonstrates managements effectiveness to purchase and utilize
assets in an efficient manner.
Earnings per Share increased by $1.96 from 2013 to 2014. As they were $6.85 and $8.81
respectively. This element demonstrates Magnas ability to maximize shareholder wealth.
Judging by these financial ratios, it seems that investing in Magna International Inc. stock could
be a favorable option for the long-term investor seeking to diversify his or her holdings.

3|Page

Jorge Fuentes

BFIN 250 Make-Up Assignment

27/04/2015

APPENDIX 1: INCOME STATEMENT

APPENDIX 2: BALANCE SHEET

4|Page