Dana Incorporated (NYSE:DAN): Can Growth Justify Its September Share Price?

Growth expectations for Dana Incorporated (NYSE:DAN) are high, but many investors are starting to ask whether its last close at $13.85 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

Check out our latest analysis for Dana

Exciting times ahead?

The excitement around Dana’s growth potential is not unfounded. Expectations from 9 analysts are extremely bullish with earnings per share estimated to surge from current levels of $1.559 to $3.096 over the next three years. On average, this leads to a growth rate of 34% each year, which indicates an exceedlingly positive future in the near term.

Can DAN’s share price be justified by its earnings growth?

Stocks like Dana, with a price-to-earnings (P/E) ratio of 8.88x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that DAN is undervalued relative to the current US market average of 17.54x , and undervalued based on its latest annual earnings update compared to the Auto Components average of 15.3x .

NYSE:DAN Price Estimation Relative to Market, September 6th 2019
NYSE:DAN Price Estimation Relative to Market, September 6th 2019

We already know that DAN appears to be undervalued based on its PE ratio, compared to the industry average. But, to be able to properly assess the value of a high-growth stock such as Dana, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 8.88x and expected year-on-year earnings growth of 34% give Dana an extremely low PEG ratio of 0.26x. This means that, when we account for Dana’s growth, the stock can be viewed as relatively cheap , based on its fundamentals.

What this means for you:

DAN’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are DAN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has DAN been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of DAN’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.