Limitation: P/E Ratios Ignore Debt and Cash In The Bank
One drawback of using a P/E ratio is that it considers market capitalization, but not the balance sheet. In other words, it does not consider any debt or cash that the Dan stock at https://www.webull.com/newslist/nyse-dan company may have on the balance sheet. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth.
While growth expenditure doesn’t always pay off, the point is that it is a good option to have; but one that the P/E ratio ignores.
Dana’s Balance Sheet
Net debt totals a substantial 124% of Dana’s market cap. This level of debt justifies a relatively low P/E, so remain cognizant of the debt, if you’re comparing it to other stocks.
The Bottom Line On Dana’s P/E Ratio
Dana trades on a P/E ratio of 9.9, which is below the US market average of 14.8. Given meaningful debt, and a lack of recent growth, the market looks to be extrapolating this recent performance; reflecting low expectations for the future. What we know for sure is that investors are becoming less uncomfortable about Dana’s prospects, since they have pushed its P/E ratio from 7.1 to 9.9 over the last month. For those who like to invest in turnarounds, that might mean it’s time to put the Dan stock on a watchlist or research it. But others might consider the opportunity to have passed.
Dana Incorporated to Participate in Bank of America Global Automotive Summit
MAUMEE, Ohio, May 11, 2020/PRNewswire/ – Dana Incorporated (NYSE: DAN)
It was announced today that, it will present at the Bank of America Global Auto Summit on May 15, 2020. Beginning at 3:50 p.m. EDT, Dana’s chairman and chief executive officer, James Kamsickas, and executive vice president and chief financial officer, Jonathan Collins, will be participating in a fireside chat.
Dana is a world leader in providing power-conveyance and energy-management solutions that are engineered to improve the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment.
Founded in 1904, Dana employs more than 36,000 people who are committed to delivering long-term value to their customers, which include nearly every vehicle manufacturer in the world. Based in Maumee, Ohio, USA, and with locations in 34 countries across six continents, the company reported sales of $8.6 billion in 2019. Having established a high-performance culture that focuses on its people, the company has earned recognition around the world as a top employer. You can also check its stock at https://www.webull.com/newslist/nasdaq-itci.