The auto sector is facing several challenges as we look ahead to the next decade. Consumers are wrestling with record debt levels in the developed world. Couple that with the danger of an economic slowdown, and the fears surrounding the auto sector are justified.
Magna International (TSX:MG)(NYSE:MGA) is the largest automobile parts manufacturer in North America. Shares have climbed 9% in 2019 as of close on August 29.
In the second quarter of 2019 Magna reported sales of $10.1 billion. This was down 1% year-over-year, but the numbers were still historically strong. To add to that, Magna stock boasts a favourable price-to-earnings ratio of 7.5 and a price-to-book of 1.3.
Linamar (TSX:LNR) is another top North American automobile parts manufacturer. Shares have dropped 10.7% in 2019 so far. The stock is currently hovering around a 52-week low. In the second quarter Linamar reported sales of $2.1 billion which were down 3.3% from Q2 2018.
However, its strong cash flow of $179 million did work to bring net debt levels down. Linamar stock also boasts a favourable P/E ratio of 5 and a P/B of 0.6.
Floundering demand in the auto sector may put a cap on sales growth for companies like Magna and Linamar as we look ahead to the 2020s.
Both stocks boast solid technicals, but broader headwinds have me looking elsewhere right now.
