Dana Incorporated: Patience Should Be Well Rewarded

Core Viewpoint - Dana Incorporated has shown mixed financial results, with significant revenue growth but volatility in profitability metrics, leading to a recommendation to maintain a 'buy' rating due to its attractive valuation compared to peers [4][12]. Financial Performance - The company reported a revenue of $10.56 billion for the 2023 fiscal year, a 3.9% increase from $10.16 billion in 2022, primarily driven by organic growth [10]. - Revenue from Europe increased by $491 million, or 16.1%, with $460 million attributed to organic growth, supported by strong demand in off-highway, mining, and construction sectors [10]. - In the first quarter of 2024, revenue reached $2.74 billion, a 3.4% increase from $2.64 billion in the same period of 2023, largely due to a 14.1% rise in light vehicle production [9]. Profitability Metrics - The company transitioned from a net loss of $242 million in 2022 to a net gain of $38 million in 2023, influenced by the absence of goodwill impairment charges and lower income tax expenses [2]. - Operating cash flow decreased from $649 million to $476 million, but adjusted for working capital changes, the decline was smaller, from $450 million to $406 million [2]. - EBITDA improved from $700 million to $845 million, indicating operational efficiency despite challenges [2]. Market Position and Valuation - Dana Incorporated's shares are considered cheap, trading at a price to operating cash flow of 5.0 and an EV to EBITDA of 5.4, making it one of the most attractively priced companies in its peer group [6][8]. - The company is expected to benefit from organic growth of approximately $270 million year over year, with additional contributions from electric vehicle sales [5]. Future Outlook - Management projects revenue for 2024 to be between $10.65 billion and $11.15 billion, with EBITDA expected between $875 million and $975 million [9]. - Despite mixed results, management remains optimistic about future performance, particularly in light vehicle production and organic growth opportunities [9][10].