Should Dana (NYSE:DAN) Be Disappointed With Their 39% Profit?

By
Simply Wall St
Published
December 18, 2020

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Dana Incorporated (NYSE:DAN) share price is up 39% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 6.9%.

Check out our latest analysis for Dana

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Dana actually saw its EPS drop 46% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, Dana's revenue is growing nicely, at a compound rate of 7.5% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NYSE:DAN Earnings and Revenue Growth December 18th 2020

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What about the Total Shareholder Return (TSR)?

We've already covered Dana's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Dana's TSR of 51% over the last 5 years is better than the share price return.

A Different Perspective

Dana shareholders gained a total return of 7.6% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 5 warning signs for Dana (1 is significant) that you should be aware of.

Of course Dana may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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. 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.
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