Novice Investing - Delphi, Dana, Magna

Date: Tuesday 13th 2008f May 2008 07:11:02 AM

Delphi, Dana, Magna - 09/21/2005

By: Novice Investing Staff

Delphi, Dana, Magna - What does these three names have something in common? Yep, they are three of the biggest auto suppliers in the United States. In 2004, Delphi (DPH), Dana (DCN) and Magna (MGA) has a sales of $ 28.6 Billion, $ 8.99 Billion and $ 20.65 Billion respectively. Anything else? Yep, they are mightily dependent on three of the biggest US automakers, General Motor (GM), Ford (F) and Daimler Chrysler (DCX). For fiscal year 2004, sales composition from Big three automakers for Delphi, Dana and Magna is 40%, 36% and 61 % respectively. Here is the complete comparison for Auto suppliers' sales.

The similarity ends there, however. For 2005 operational performance, Delphi is expected to lose $2.44 per share or $ 1.37 Billion. Dana is expected to earn $ 0.70 per share or $ 106 Million. Meanwhile, Magna is expected to earn $ 6.95 per share or $ 759 Million. Now, these estimates are from Yahoo! Finance and we do not necessarily agree with that. We merely use these for comparison purposes.

The difference doesn't end there. As of June 2005, both Delphi and Dana has a negative net cash of $ 1.97 Billion and $ 1.31 Billion respectively. Negative net cash means that a company's balance sheet has larger long-term debt than cash on hand. Automotive is such a capital intensive industry and it is common for companies to have negative net cash, right? Well, look harder. Magna International (MGA) has a positive net cash of $ 533 Million or $ 4.88 per share.

The auto sector has been in a decline this past year due to problems facing the big three US automakers. No doubt Delphi, Dana and Magna will feel the impact of their problems. However, it looks to us that Magna has a more solid balance sheet and operational performance to weather the storm stronger than the other two. Dana and Delphi might offer a better return should the big three automakers turn around. But if they continue to struggle, then investors should have chosen companies with a cleaner balance sheet and a better operational performance. Magna International (MGA) fits both criteria.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Magna International Inc.(MGA) or other securities.

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