Components of electric vehicle battery trays are prepared to be welded at Magna's Heart Lake production facility, in Brampton, Ont., in 2023.Christopher Katsarov/The Globe and Mail
Canadian companies are being caught up again by U.S. President Donald Trump’s erratic trade policies, and now face more logistical headaches over capricious tariffs and uprooted supply chains.
But spare no sympathy for Magna International Inc. MG-T. The share price of the auto parts giant, based in Aurora, Ont., has more than doubled from its recent low 15 months ago, leaving investors with just one head-scratcher.
How high can this stock go?
Mr. Trump’s second term has been defined by outspoken belligerence toward allies and trading partners – and he has shown no signs of letting up.
This week, he announced 50-per-cent tariffs against hundreds of Canadian exports valued at about US$20-billion in total, a year after imposing tariffs on steel, aluminum and autos.
It marks an escalation in his trade war against Canada and a tough-guy approach to negotiations after opting not to renew the United States-Mexico-Canada Agreement earlier this month.
Magna, however, is cruising through these uncertain times, underscoring the company’s delightfully neutral place among trading nations, auto makers, vehicle models and powertrains.
How else to explain the stock’s recent outperformance next to Ford Motor Co. F-N, General Motors Co. GM-N and others? Magna has beaten the share performance of Ford and GM alone by 19 percentage points, on average, over the past 12 months.
For that matter, Magna has outperformed Nvidia Corp. NVDA-Q, the chip-maker at the centre of the artificial intelligence phenomenon, and the broad S&P 500 INX – Mr. Trump’s occasional benchmark for U.S. economic performance – by more than 40 percentage points each over the same period.
Magna had a couple of things going for it over the past year.
For one, the stock was cheaply valued before the rally began, as investors fretted over trade, the economy and the company’s exposure to floundering electric-vehicle sales in North America.
In April, 2025, it traded at less than seven times estimated earnings, according to S&P Global Market Intelligence. That was well below the 10-year average price-to-earnings ratio of 9.4 and near the lowest end of the valuation range over the past decade.
This cheap status wasn’t deserved, though, which is the other factor that helped drive the stock’s rally over the past year: Magna addressed investor concerns with solid financial performance.
In the first quarter, revenues increased by 3 per cent compared with the same period last year, even as global light vehicle production declined by 7 per cent.
Profit margins expanded to 5.4 per cent, up from 3.5 per cent last year, suggesting that tariffs aren’t a drag on performance. And adjusted earnings per share increased by 77 per cent, sailing past analysts’ estimates.
Now, with Magna set to release its second-quarter financial results on July 31, the pressure is on.
The stock is no longer cheap. The share price has rallied 26 per cent in 2026 alone and the price-to-earnings ratio has expanded to 10. That is the highest valuation in about three years and suggests that investor expectations could be harder to satisfy now.
Still, there’s a strong case here for holding on or relishing the next dip if Thursday’s market downturn proves to be more than a brief selloff.
Magna has the ability to expand beyond auto parts by allocating spare manufacturing capacity to areas of promising growth, including robotics, battery storage and defence, where it can leverage its expertise, according to Jonathan Goldman, an analyst at Bank of Nova Scotia.
“These opportunities come with significantly higher margins and don’t require a lot of incremental capital expenditures,” Mr. Goldman said in a note this week.
Magna is also capable of further improvement to its profit margins with the help of advanced technology that can detect part defects and pilot autonomous forklifts.
In a call with analysts in May, Philip Fracassa, Magna’s chief financial officer, said he expects margins − specifically, earnings before interest and taxes, or EBIT, to revenues – to expand to a range between 6 per cent and 6.6 per cent this year, even if sales are slightly lower.
If he’s right, the expansion will drive further growth in profits and cash flow, which can be put toward share buybacks, an alternative to dividends.
No doubt, U.S. tariffs are a nuisance that added up to a US$160-million hit to the company last year.
But if the rally in the share price is proving anything, it’s that Magna is a bigger force than Mr. Trump’s trade policies – and a stock to own when he’s trying to make a deal with scare tactics.