Tuesday, October 1, 2013

Seeking Alpha: Can Dana Do What So Few Parts Companies Can?

It hasn't exactly been difficult to find winning auto parts/components stocks over the past year, but Dana (DAN) has nevertheless enjoyed a good run - up more than 80% and within a hair's breadth of its 52-week high as of this writing. There are definitely a lot of things to like about Dana - it has a pretty good balance sheet (for a parts/components company), it has a good recent history of margin improvements, and a very diverse and balanced business.

The question is whether the good times can continue. There are certainly some near-term headwinds. Expectations for light vehicle (LV), commercial vehicle (CV), and off-highway vehicle volume growth in Europe have come down significantly, and growth in key markets like Brazil is still erratic (recently LVs have been weak, while CVs have been strong). What's more, while Dana appears to be on a good path today, the track record of companies in this industry with respect to sustained long-term free cash flow generation is not at all good. Although I do believe Dana still scores well for quality and relative value, the probable free cash flow path is a little less convincing.

Please continue here:
Can Dana Do What So Few Parts Companies Can?

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