Would you add to MG at these level? As a long term hold, do you consider the stock relatively safe? Thank you.
MG is trading at 7.8x Forward P/E, at the lower end of historical averages that range from 7.8x to 13.1x. MG is a cyclical business that depends on the OEM cycle. The share price was under pressure recently partly due to a combination of increasing investment (in terms of capex and M&A) which made the balance sheet slightly leveraged at 1.5x net debt/EBITDA, while the benefits of these investments take some time to hit the financial statements. Overall, MG is cheap, but should do okay from these levels, but investors need patience for the thesis to play out which may take three to five years. We would consider it 'relatively' safe, at least as much as one can expect in a cyclical business. Its large size and global diversified business helps.