Critical Analysis: Magna International (MGA) vs. Harman International Industries (HAR)

Harman International Industries (NYSE: HAR) and Magna International (NYSE:MGA) are both mid-cap cyclical consumer goods & services companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, institutional ownership, dividends, profitability, earnings and valuation.

Earnings & Valuation

This table compares Harman International Industries and Magna International’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Harman International Industries N/A N/A N/A $5.06 22.04
Magna International $36.45 billion 0.58 $2.03 billion $5.61 10.39

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

Volatility and Risk

Harman International Industries has a beta of 1.55, meaning that its stock price is 55% more volatile than the S&P 500. Comparatively, Magna International has a beta of 1.5, meaning that its stock price is 50% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for Harman International Industries and Magna International, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Harman International Industries 0 1 0 0 2.00
Magna International 1 4 9 1 2.67

Magna International has a consensus price target of $61.83, indicating a potential upside of 6.10%. Given Magna International’s stronger consensus rating and higher probable upside, analysts clearly believe Magna International is more favorable than Harman International Industries.

Institutional and Insider Ownership

85.8% of Harman International Industries shares are owned by institutional investors. Comparatively, 59.7% of Magna International shares are owned by institutional investors. 0.9% of Harman International Industries shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Harman International Industries pays an annual dividend of $1.40 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 1.9%. Harman International Industries pays out 27.7% of its earnings in the form of a dividend. Magna International pays out 19.6% 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. Harman International Industries has raised its dividend for 7 consecutive years and Magna International has raised its dividend for 6 consecutive years. Magna International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

Net Margins Return on Equity Return on Assets
Harman International Industries 5.12% 15.69% 6.40%
Magna International 5.63% 19.46% 8.92%

Summary

Magna International beats Harman International Industries on 11 of the 16 factors compared between the two stocks.

About Harman International Industries

Harman International Industries, Incorporated is engaged in the designing and engineering of connected products and solutions for automakers, consumers and enterprises, including connected car systems, audio and visual products, enterprise automation solutions and connected services. The Company’s segments include Connected Car, Lifestyle Audio, Professional Solutions, Connected Services and Other. The Connected Car segment designs, manufactures and markets connected car systems for vehicle applications. The Lifestyle Audio segment designs, manufactures and markets car audio systems. The Professional Solutions segment designs, manufactures and markets a range of audio, lighting, video and control, and automation solutions for entertainment and enterprise applications The Connected Services segment includes the operations of Symphony Teleca Corporation, Red Bend Ltd. and its automotive services businesses. Its brands include AKG, AMX, Crown, Infinity, JBL, Revel, Soundcraft and Studer.

About Magna International

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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