Sunday, June 3, 2018

Is Dana's Curious Valuation A Buying Opportunity?

Novice investors ask, "is it cheap?", but veteran investors know that the right question is often "why is it cheap?", and that certainly is a valid question to ask about Dana (DAN). Plenty of auto and commercial vehicle suppliers have ugly year-to-date charts, and while Dana's negative 30% performance is bad, it's not dramatically worse than Tenneco's (TEN), Commercial Vehicle's (CVGI), or Meritor's (MTOR).

Dana has exposure to weakening trends in light and commercial vehicles, and some risk from electrification, and yet the valuation is kind of a head-scratcher. Unless sell-side expectations are significantly off-base (and the market's valuation seems to be a strong vote that they are), these shares should trade somewhere in the high $20s to low $30s. It's certainly true that Dana doesn't have a great history with margins or overall performance, but it seems like the Street is pricing in some low expectations, and value-oriented and contrarian investors may want to take a look.

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Is Dana's Curious Valuation A Buying Opportunity?

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