Linamar vs Magna in 2020

Encouraging news has emerged from Canada’s auto sector in recent months. Canadian auto sales rose 0.8% in the month of January, which was positive after a sharp year-over-year drop in January 2019.

The sector also breathed a sigh of relief in late January after United States President Trump signed the revamped United States-Mexico-Canada (USMCA) trade agreement into law.

Today I want to take a snapshot of two of Canada’s top automobile parts manufacturers. Which is the better buy today?

Linamar (TSX:LNR) is the second-largest automobile parts manufacturer in Canada. Its shares have already plunged 20% in 2020 as of close on February 25. The stock has also taken a hit due to broader volatility in the Canadian market.

Investors can expect to see its fourth-quarter and full-year results for 2019 in March. In Q3 2019, Linamar reported a sales decrease of 5.3% from the prior year to $1.7 billion.

For the year-to-date period, the company has reported net earnings of $380 million over $467 million in 2018. The stock last had a favourable price-to-earnings ratio of 5 and a price-to-book value of 0.6.

Magna International (TSX:MG)(NYSE:MGA) is the largest automobile parts manufacturer in North America. Its stock plunged 5.13% on February 25 and has dropped 12% to start the year.

Sales and earnings fell in 2019, but it still reported record cash from operations of $3.96 billion. It also raised its quarterly dividend by 10% to $0.40 per share. This represents a 3.3% yield.

Shares of Magna boast a P/E ratio of 8.4 and a P/B value of 1.3. Both Linamar and Magna have plunged into technically oversold territory over the past week. However, Magna is the only one of these stocks I’m interested in adding on the dip today.