■ It’s Canadian automotive parts makers Magna International Inc. vs. Linamar Corp. in this week’s Faceoff.
You don’t have to be gigantic to be successful. Linamar is proof of that. While it might not have the name recognition of Magna and its high-profile founder Frank Stronach, Linamar has been steadily building up a solid roster of auto industry clients since its founding in 1966. It’s also diversified, albeit not quite as broadly as Magna, into building construction cranes (via its subsidiary Skyjack) and its 2018 takeover of agricultural equipment maker MacDon.
Like Magna, Linamar also had a blockbuster fourth quarter in 2020, with earnings jumping to $113.1 million, more than double the $49.7 million profit brought in during the same period the year before. It also had a strong enough third quarter thanks partly to federal COVID aid that it boosted its dividend from six cents per share, to 12 cents. Despite that boost, Linamar’s dividend yield is a paltry 0.55 per cent. In comparison, Magna’s is 1.73 per cent.
And just as investors have taken a shine to Magna, the same has happened to Linamar, with the company’s shares almost doubling in the past year.
By several measures, Linamar is doing even better than its gigantic cross-province rival. It’s got a profit margin more than double that of Magna’s (4.8 per cent, vs. 2.3). It’s also got a higher return on equity (6.7 per cent vs. 5.9) and a lower debt to equity ratio. Perhaps most appealing to investors, however, it’s also a cheaper stock to buy, both in dollars, and relative to earnings, with a price to earnings ratio of 17.25.