When companies post strong earnings, the stock generally performs well, just like Dana Incorporated's (NYSE:DAN) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.
See our latest analysis for Dana
The Impact Of Unusual Items On Profit
For anyone who wants to understand Dana's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$65m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Dana doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On Dana's Profit Performance
Because unusual items detracted from Dana's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Dana's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Dana at this point in time. Our analysis shows 3 warning signs for Dana (1 is concerning!) and we strongly recommend you look at these bad boys before investing.
This note has only looked at a single factor that sheds light on the nature of Dana's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About NYSE:DAN
Dana
Provides power-conveyance and energy-management solutions for vehicles and machinery in North America, Europe, South America, and the Asia Pacific.
Undervalued with moderate growth potential.
