Magna International Inc. MGA generated $3.6 billion in operating cash flow and $1.9 billion in free cash flow in 2025. This performance reflects a disciplined approach to capital spending, with capital expenditures improving to 3.1% of sales, alongside continued enhancements in fixed cost structure and engineering optimization. As a result, the company ended the year with an agency-adjusted debt-to-EBITDA ratio of 1.58x, which surpassed its expectation of being below 1.7x.
Looking ahead, the company expects 2026 to be another year of strong free cash flow, projected in the range of $1.6 billion to $1.8 billion or more than 90% of adjusted net income. Magna expects this level of free cash flow to be sustainable and is targeting a 100% conversion of net income into free cash flow. It expects this consistency to support its capital allocation strategy not only in 2026 but also in the years ahead.
For 2026, after accounting for dividends, it anticipates having substantial cash available for share repurchases while continuing to reduce leverage and maintain financial flexibility to support business operations. The company expects its leverage ratio to fall below 1.5x in 2026. MGA stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Expected Free Cash Flow Performance of MGA’s Competitors
Adient plc ADNT expects free cash flow of $125 million in fiscal 2026, down from $204 million in fiscal 2025 as a result of three main factors. First, cash flow in the prior year benefited from a favorable $30 million pull-ahead that will not repeat. Second, cash taxes in fiscal 2026 will be higher, tied to a one-time non-recurring tax settlement in a non-U.S. jurisdiction. Third, capex is expected to remain high amid customer launch schedules and higher investment in innovation and automation.
PHINIA Inc. PHIN demonstrates consistent cash generation in 2025 with adjusted free cash flow of $212 million. For 2026, it expects adjusted free cash flow in the range of $200-$400 million, roughly flat to up with 2025 levels. Importantly, PHINIA is actively returning capital to shareholders, distributing $242 million in 2025 through buybacks and dividends. In January, it further reinforced its shareholder-friendly stance with an 11% dividend hike and a $150 million share buyback boost.
Magna’s Price Performance, Valuation and Estimates
Magna has outperformed the Zacks Automotive-Original Equipment industry in the past six months. MGA shares have gained 29.9% against the industry’s decline of 8%.
Image Source: Zacks Investment Research
From a valuation perspective, MGA appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.37, lower than the industry’s 2.1.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MGA’s 2026 and 2027 EPS has moved up 77 cents and 95 cents, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.
SeeWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Magna International Inc. (MGA): Free Stock Analysis Report
Adient (ADNT): Free Stock Analysis Report
PHINIA Inc. (PHIN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).