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For those inclined to see corrections as fire sales, Magna International Inc. is difficult to ignore. The recent selloff sent the stock tumbling by 25 per cent, lopping $6-billion off its market value.

It has since bounced back substantially, but is still an 18-per-cent move away from recovering its August high. It's a compelling entry point for those who believe the auto recovery still has plenty of ground left to cover.

"We were buying at $125 and we're buying aggressively at this price," said David Baskin, president of Baskin Financial.

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Having ridden the postrecession resurgence in North American vehicle sales, auto parts stocks began to pull back in August.

The sector's cyclical nature made it vulnerable to broad economic concerns. "In addition, there are concerns that the U.S. [rate of auto sales] is peaking and has limited upside," BMO Nesbitt Burns analyst Peter Sklar said in a recent note.

Then economic frailties resurfaced in Europe, where 40 per cent of Magna's revenues originate, Mr. Sklar said.

As the sentiment turned against auto parts stocks, many Magna investors likely took the opportunity to lock in some gains on a stock that had risen from about $40 to more than $125 in about two years. Such profit-taking likely compounded the losses for Magna, which dipped to about $95 by last Tuesday, almost $30 lower than two months' prior.

"That was silly," Mr. Baskin said. "There was nothing company-specific that would make you think Magna is worth 20 to 25 per cent less today than it was a month ago."

Magna now trades at an enterprise value of about 5.4 times estimated 2015 EBITDA (earnings before interest, taxes, depreciation and amortization). That's discounted to the peer group average, which, according to Bloomberg data, is about 5.9 times.

Before the selloff, Magna traded at a premium to its peers, which was "justified given Magna's earnings growth outlook, diversification, global footprint, dividend and balance sheet," Steve Arthur, an analyst at RBC Dominion Securities, wrote in a research note after Magna's latest earnings release in August.

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That report disclosed record-high revenues in the second quarter, and earnings that came in ahead of analysts' expectations. The company also raised its production estimates for North America and Europe, and improved its guidance on profit margins.

Meanwhile, Magna continues to aggressively accumulate its own stock, with its program to buy back 20 million shares set to expire in November.

The company has plenty of resources yet to deploy, with a $658-million (U.S.) net cash (cash minus debt) position as of the end of the second quarter.

"As Magna looks to reduce the excess cash held in the business, and move to a modest leverage position, we expect them to deploy capital on further dividend increases, share buybacks and potentially accretive acquisitions," Mr. Arthur said.

There's a good argument to be made that the concerns raised over Magna are overblown, Mr. Baskin said. On the strength of the auto recovery, "the U.S. industry in particular still has a few years to run at a high rate, because the fleet got so old, and the replacement cycle was so delayed," he said.

Global production is expected to increase at a 3-per-cent compounded annual growth rate through 2017, a pace that Magna can exceed, according to RBC, which has an "outperform" rating and a target price of $138.40.

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The company's exposure to Europe's troubles, meanwhile, is mitigated by the fact that 70 per cent of Magna's European sales are to German auto manufacturers, "which have a significant proportion of production committed to export sales to China and the U.S.," Mr. Sklar said.

And with a dividend payout ratio of less than 20 per cent, the prospects are high for future dividend increases to Magna's shareholders, Mr. Baskin said.

Magna's slide was so substantial that even with the ensuing 11-per-cent rebound to yesterday's close, the current valuation leaves plenty of room to buy the dip, Mr. Baskin said.

"We thought it was really a huge overreaction."

Editor's Note: An earlier version of this story incorrectly stated Magna's net cash position was in billions.

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