It's been a rough 12 months for the vehicle components space, as
investors have started worrying about whether passenger vehicle growth
will prove sustainable in North America and the EU, while commercial
vehicle demand rolls over and off-highway vehicle demand remains
moribund. Of the companies I pay the most attention to, Dana (NYSE:DAN)
has been among the weakest performers as the company has significant
exposure to the weakening/weak commercial and off-highway markets and
additional market share concerns as well.
When it comes to the valuation, Dana is probably undervalued today
but it is difficult to defend a company with a track record of more
earnings misses than beats, heavy exposure to weak markets and
geographies, and relatively weak prospects for leveraging unique
technology into significant margin or return outperformance. If Dana can
boost its long-term free cash flow margins above 4%, it takes less than
3% annual revenue growth to support a $14.50 fair value. That said,
sentiment is pretty sour here (only Cummins (NYSE:CMI)
appears worse in the group I follow closely), so a run of
outperformance, however unlikely that may be, would be a powerful driver
for the shares provided it is enough to convince the doubters to get
more bullish.
Continue here:
Dana Holding Finding It Hard To Hold Onto Growth
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