Novice Investing - Dent in Dana's Book

Date: Monday 01st 2008f December 2008 05:19:22 PM

Dent in Dana's Book - 10/12/2005

By: Novice Investing Staff

Dana Corporation (DCN) gave the jolt on Monday Oct 12th by announcing restatement of earning and its book. Sure, we know that the auto sector is in a mess with the bankruptcy of Delphi. Dana just made it worse. Dana would restate earnings for 2004 and the first half of 2005. Now, analyst speculate that Dana will be the next in line to file for bankruptcy.

There are too much uncertainty in Dana. Unclean book is one of the ten reasons investor should sell a common stock. Dana stock, meanwhile has plunged from $ 9 to $ 5.75 after the announcement. Investors just do not want another Delphi on their portfolio. This is understandable.

To be fair, before the restatement, Dana had a lot of appeal for investors wanting higher risk higher reward investment. It paid $ 0.48 dividend, which at recent price, translates into 7.90% yield. It was expected to earn $ 0.65 for fiscal year 2005. Thus, the dividend was deemed to be safe. Sure, Dana had $ 1.3 Billion of net debt recently but if it can service its debt, why not?

Now, things don't look so sure anymore. With its accounting in doubt, DCN might be in worse shape than everybody thought. $ 1.3 Billion translates into $ 8.66 per share of net debt. With $ 0.65 of expected profit, it takes 13 years to eliminate the debt. In addition, management has overstated their book. Dana's $ 0.48 dividend per share is in jeopardy. So, does its existence. The prudent thing for investors to do is to wait until the book is clear before investing in Dana. Steer clear! You don't want another Delphi in your portfolio.

END

For preliminary research, you can browse our collection of annual reports here

You can also view other helpful commentary by clicking here

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 Dana Corporation (DCN) or other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]